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. 18 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
Amendment No. 18 [X]
(Check appropriate box or boxes)
JOHN HANCOCK EQUITY TRUST
(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
Susan S. Newton
Vice President and Secretary
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
(Name and Address of Agent for Service)
It is proposed that this filing will become efective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[X] on August 28, 2000 pursuant to paragraph (a) of Rule 485
If appropriate, check off the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
John Hancock
Growth Trends Fund
Prospectus
August 28, 2000
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The fund will commence operations and close to
new investors and subsequent investments on
September 22, 2000.
460PN
Draft 5/25/00
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the fund or determined whether the information in this
prospectus is adequate and accurate. Anyone who indicates otherwise is
committing a federal crime.
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
Contents
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A summary of the fund's Growth Trends Fund 4
goals, strategies, risks, per-
formance and expenses.
Policies and instructions for Your account
opening, maintaining and Choosing a share class 6
closing an account. How sales charges are calculated 6
Sales charge reductions and waivers 7
Opening an account 8
Buying shares 9
Selling shares 10
Transaction policies 12
Dividends and account policies 12
Additional investor services 13
Further information on the Fund details
fund. Business structure 14
For more information back cover
3
<PAGE>
Growth Trends Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term growth of capital. To pursue this goal, the
fund normally invests approximately 1/3 of assets in stocks of U.S. and foreign
companies in each of the following sectors: financial services, health care and
technology. Due to changes in market values, assets will be reallocated annually
and cash will be reallocated daily in order to attempt to achieve a 1/3
weighting in each sector. The fund attempts to concentrate its investments
within each of the three sectors in 20 to 35 companies.
In managing the portfolio, the managers focus primarily on stock selection
rather than industry allocation.
In choosing individual stocks, the managers seek to identify economic and social
trends and companies positioned to benefit from these trends. They use
fundamental financial analysis to identify individual companies of any size that
appear most attractive in terms of earnings stability, growth potential and
valuation. The managers focus on companies that are undergoing a business
change.
The fund may invest in certain higher-risk securities, including securities that
are not publicly offered or traded, restricted securities.
The fund may use certain derivatives (investments whose value is based on
indices, securities or currencies).
In abnormal market conditions, the fund may temporarily invest in
investment-grade short-term securities. In these and other cases, the fund might
not achieve its goal.
The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.
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ADVISER
John Hancock Advisers, Inc.
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Team responsible for financial
services sector investment
management
SUBADVISERS
Mercury Asset Management US,
a division of Fund Asset
Management, L.P.
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Team responsible for health
care sector investment
management
Founded in 1977
Supervised by the adviser
American Fund Advisors, Inc.
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Team responsible for technology
sector investment management
Founded in 1978
Supervised by the adviser
PAST PERFORMANCE
[Clip Art] This section normally shows how the fund's total return has varied
from year to year, along with a broad-based market index for reference. Because
the fund is a new fund, there is no past performance to report.
4
<PAGE>
MAIN RISKS
[Clip Art] The value of your investment will go up and down in response to stock
market movements.
The fund's management strategy has a significant influence on fund performance.
Because the fund focuses on a few sectors of the economy, its performance
depends in large part on the performance of these sectors. As a result, the
value of your investment may fluctuate more widely than it would in a fund that
is diversified across several sectors.
Stocks of financial services, health care and technology companies
as a group could fall out of favor with the market, causing the fund to
underperform funds that focus on other types of stocks or in other economic
sectors. In addition, if the managers' stock selection strategy does not perform
as expected, the fund could underperform its peers or lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
o Investments in the fund are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. You could lose money by investing in this fund.
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YOUR EXPENSES
[Clip Art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly. The figures below show estimated annualized expenses. Actual
expenses may be greater or less.
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Shareholder transaction expenses(1) Class A Class B Class C
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Maximum sales charge (load) on purchases
as a % of purchase price 5.00% none 1.00%
Maximum deferred s ales charge (load)
as a % of purchase or sale price,
whichever is less none(2) 5.00% 1.00%
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Annual operating expenses Class A Class B Class C
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Management fee 1.00% 1.00% 1.00%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 0.42% 0.42% 0.42%
Total fund operating expenses 1.72% 2.42% 2.42%
Expense reimbursement (at least
until 2/28/02) 0.07% 0.07% 0.07%
Net annual operating expenses 1.65% 2.35% 2.35%
The hypothetical example below shows what your expenses would be after the
expense reimbursement (first year only) if you invested $10,000 over the time
frames indicated, assuming you reinvested all distributions and that the average
annual return was 5%. The example is for comparison only, and does not represent
the fund's actual expenses and returns, either past or future.
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Expenses Year 1 Year 3 Year 5 Year 10
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Class A $659 $1,008 $1,308 $2,423
Class B - with redemption $738 $1,048 $1,484 $2,578
- without redemption $238 $ 748 $1,284 $2,578
Class C - with redemption $435 $ 840 $1,371 $2,823
- without redemption $336 $ 840 $1,371 $2,823
(1) A $4.00 fee may be charged for wire redemptions.
(2) Except for investments of $1 million or more; see "How sales charges are
calculated."
FUND CODES
Class A
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Ticker --
CUSIP
Newspaper --
SEC number 811-4079
JHfund number 46
Class B
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Ticker --
CUSIP
Newspaper --
SEC number 811-4079
JHfund number 146
Class C
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Ticker --
CUSIP
Newspaper --
SEC number 811-4079
JHfund number 546
5
<PAGE>
Your account
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CHOOSING A SHARE CLASS
Each share class has its own cost structure, including a Rule 12b-1 plan that
allows it to pay fees for the sale, distribution and service of its shares. Your
financial representative can help you decide which share class is best for you.
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Class A
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o A front-end sales charge, as described at right.
o Distribution and service (12b-1) fees of 0.30%.
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Class B
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o No front-end sales charge; all your money goes to work for you right away.
o Distribution and service (12b-1) fees of 1.00%.
o A deferred sales charge, as described on following page.
o Automatic conversion to Class A shares after eight years, thus reducing
future annual expenses.
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Class C
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o A front-end sales charge, as described at right.
o Distribution and service (12b-1) fees of 1.00%.
o A 1.00% contingent deferred sales charge on shares sold within one year of
purchase.
o No automatic conversion to Class A shares, so annual expenses continue at
the Class C level throughout the life of your investment.
Because 12b-1 fees are paid on an ongoing basis, they may cost shareholders more
than other types of sales charges.
Investors purchasing $1 million or more of Class B or Class C shares may want to
consider the lower operating expenses of Class A shares.
Your broker receives a percentage of these sales charges and fees. In addition,
John Hancock Funds may pay significant compensation out of its own resources to
your broker.
Your broker or agent may charge you a fee to effect transactions in fund shares.
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HOW SALES CHARGES ARE CALCULATED
Class A and Class C Sales charges are as follows:
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Class A sales charges
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As a % of As a % of your
Your investment offering price investment
Up to $49,999 5.00% 5.26%
$50,000 - $99,999 4.50% 4.71%
$100,000 - $249,999 3.50% 3.63%
$250,000 - $499,999 2.50% 2.56%
$500,000 - $999,999 2.00% 2.04%
$1,000,000 and over See below
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Class C sales charges
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As a % of As a % of your
Your investment offering price investment
Up to $1,000,000 1.00% 1.01%
$1,000,000 and over none
Investments of $1 million or more Class A and Class C shares are available with
no front-end sales charge. However, there is a contingent deferred sales charge
(CDSC) on any Class A shares sold within one year of purchase, as follows:
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CDSC on $1 million+ investments
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CDSC on shares
Your investment being sold
First $1M - $4,999,999 1.00%
Next $1 - $5M above that 0.50%
Next $1 or more above that 0.25%
For purposes of this CDSC, all purchases made during a calendar month are
counted as having been made on the first day of that month.
6 YOUR ACCOUNT
<PAGE>
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.
Class B and Class C A CDSC may be charged if you sell Class B or Class C shares
within a certain time after you bought them, as described in the tables below.
There is no CDSC on shares acquired through reinvestment of dividends. The CDSC
is based on the original purchase cost or the current market value of the shares
being sold, whichever is less. The CDSCs are as follows:
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Class B deferred charges
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CDSC on shares
Years after purchase being sold
1st year 5.00%
2nd year 4.00%
3rd year or 4th year 3.00%
5th year 2.00%
6th year 1.00%
After 6th year none
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Class C deferred charges
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Years after purchase CDSC
1st year 1.00%
After 1st year none
For purposes of these CDSCs, all purchases made during a calendar month are
counted as having been made on the first day of that month.
CDSC calculations are based on the number of shares involved, not on the value
of your account. To keep your CDSC as low as possible, each time you place a
request to sell shares we will first sell any shares in your account that carry
no CDSC. If there are not enough of these to meet your request, we will sell
those shares that have the lowest CDSC.
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SALES CHARGE REDUCTIONS AND WAIVERS
Reducing your Class A sales charges There are several ways you can combine
multiple purchases of Class A shares of John Hancock funds to take advantage of
the breakpoints in the sales charge schedule. The first three ways can be
combined in any manner.
o Accumulation Privilege -- lets you add the value of any Class A shares you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge. Retirement plans investing $1 million in
Class B shares may add that value to Class A purchases to calculate
charges.
o Letter of Intention -- lets you purchase Class A shares of a fund over a
13-month period and receive the same sales charge as if all shares had
been purchased at once.
o Combination Privilege -- lets you combine Class A shares of multiple funds
for purposes of calculating the sales charge.
To utilize: complete the appropriate section of your application, or contact
your financial representative or Signature Services, or consult the SAI (see the
back cover of this prospectus).
Group Investment Program A group may be treated as a single purchaser under the
accumulation and combination privileges. Each investor has an individual
account, but the group's investments are lumped together for sales charge
purposes, making the investors potentially eligible for reduced sales charges.
There is no charge or obligation to invest (although initial investments must
total at least $250), and individual investors may close their accounts at any
time.
To utilize: contact your financial representative or Signature Services to find
out how to qualify, or consult the SAI (see the back cover of this prospectus).
CDSC waivers As long as Signature Services is notified at the time you sell, the
CDSC for each share class will generally be waived in the following cases:
o to make payments through certain systematic withdrawal plans
o to make certain distributions from a retirement plan
o because of shareholder death or disability
To utilize: if you think you may be eligible for a CDSC waiver, contact your
financial representative or Signature Services, or consult the SAI (see the back
cover of this prospectus).
YOUR ACCOUNT 7
<PAGE>
Reinstatement privilege If you sell shares of a John Hancock fund, you may
reinvest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge, as long as Signature Services is
notified before you reinvest. If you paid a CDSC when you sold your shares, you
will be credited with the amount of the CDSC. All accounts involved must have
the same registration.
To utilize: contact your financial representative or Signature Services.
Waivers for certain investors Class A shares may be offered without front-end
sales charges or CDSCs to various individuals and institutions, including:
o selling brokers and their employees and sales representatives
o financial representatives utilizing fund shares in fee-based investment
products under signed agreement with John Hancock Funds
o fund trustees and other individuals who are affiliated with these or other
John Hancock funds
o individuals transferring assets from an employee benefit plan into a John
Hancock fund
o certain John Hancock insurance contract holders (one-year CDSC usually
applies)
o participants in certain retirement plans with at least 100 eligible
employees (one-year CDSC applies)
Class C shares may be offered without front-end sales charges to various
individuals and institutions, including certain retirement plans.
To utilize: if you think you may be eligible for a sales charge waiver, contact
Signature Services or consult the SAI (see the back cover of this prospectus).
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OPENING AN ACCOUNT
1 Read this prospectus carefully.
2 Determine how much you want to invest. The minimum initial investments for
the John Hancock funds are as follows:
o non-retirement account: $1,000
o retirement account: $250
o group investments: $250
o Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must
invest at least $25 a month
o fee-based clients of selling brokers who have placed at least $2
billion in John Hancock funds: $250
3 Complete the appropriate parts of the account application, carefully
following the instructions. You must submit additional documentation when
opening trust, corporate or power of attorney accounts. You must notify
your financial representative or Signature Services if this information
changes. For more details, please contact your financial representative or
call Signature Services at 1-800-225-5291.
4 Complete the appropriate parts of the account privileges application. By
applying for privileges now, you can avoid the delay and inconvenience of
having to file an additional application if you want to add privileges
later.
5 Make your initial investment using the table on the next page. You and
your financial representative can initiate any purchase, exchange or sale
of shares.
8 YOUR ACCOUNT
<PAGE>
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Buying shares
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Opening an account Adding to an account
By check
[Clip Art] o Make out a check for o Make out a check for the investment
the investment amount, amount payable to "John Hancock
payable to "John Signature Services, Inc."
Hancock Signature
Services, Inc." o Fill out the detachable investment
slip from an account statement. If no
o Deliver the check and slip is available, include a note
your completed specifying the fund name, your share
application to your class, your account number and the
financial name(s) in which the account is
representative, or mail registered.
them to Signature
Services (address o Deliver the check and your investment
below). slip or note to your financial
representative, or mail them to
Signature Services (address below).
By exchange
[Clip Art] o Call your financial o Log on to www.jhfunds.com to process
representative or exchanges between funds.
Signature Services to
request an exchange. o Call EASI-Line for automated service
24 hours a day using your touch tone
phone at 1-800-338-8080.
o Call your financial representative or
Signature Services to request an
exchange.
By wire
[Clip Art] o Deliver your completed o Instruct your bank to wire the amount
application to your of your investment to:
financial First Signature Bank & Trust
representative, or mail Account # 900000260
it to Signature Routing # 211475000
Services.
Specify the fund name, your share class,
o Obtain your account your account number and the name(s) in
number by calling your which the account is registered. Your
financial bank may charge a fee to wire funds.
representative or
Signature Services.
o Instruct your bank to
wire the amount of your
investment to:
First Signature Bank
& Trust
Account # 900000260
Routing # 211475000
Specify the fund name,
your choice of share
class, the new account
number and the name(s) in
which the account is
registered. Your bank may
charge a fee to wire
funds.
By Internet
[Clip Art] See "By exchange" and "By o Verify that your bank or credit union
wire." is a member of the Automated Clearing
House (ACH) system.
o Complete the "Bank Information"
section on your account application.
o Log on to www.jhfunds.com to initiate
purchases using your authorized bank
account.
By phone
[Clip Art] See "By exchange" and "By o Verify that your bank or credit union
wire." is a member of the Automated Clearing
House (ACH) system.
o Complete the "Bank Information"
section on your account application.
o Call EASI-Line for automated service
24 hours a day using your touch tone
phone at 1-800-338-8080.
o Call your financial representative or
Signature Services between 8 A.M. and
4 P.M. Eastern Time on most business
days.
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Address:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
Phone Number: 1-800-225-5291
Or contact your financial representative for instructions
and assistance.
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To open or add to an account using the Monthly Automatic Accumulation Program,
see "Additional investor services."
YOUR ACCOUNT 9
<PAGE>
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Selling shares
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Designed for To sell some or all of your shares
By letter
[Clip Art] o Accounts of any type. o Write a letter of instruction or
complete a stock power indicating the
o Sales of any amount. fund name, your share class, your
account number, the name(s) in which
the account is registered and the
dollar value or number of shares you
wish to sell.
o Include all signatures and any
additional documents that may be
required (see next page).
o Mail the materials to Signature
Services.
o A check will be mailed to the name(s)
and address in which the account is
registered, or otherwise according to
your letter of instruction.
By Internet
[Clip Art] o Most accounts. o Log on to www.jhfunds.com to initiate
redemptions from your funds.
o Sales of up to
$100,000.
By phone
[Clip Art] o Most accounts. o Call EASI-Line for automated service
24 hours a day using your touch tone
o Sales of up to phone at 1-800-338-8080.
$100,000.
o Call your financial representative or
Signature Services between 8 A.M. and
4 P.M. Eastern Time on most business
days.
By wire or electronic funds transfer (EFT)
[Clip Art] o Requests by letter to o To verify that the Internet or
sell any amount. telephone redemption privilege is in
place on an account, or to request the
o Requests by Internet or form to add it to an existing account,
phone to sell up to call Signature Services.
$100,000.
o Amounts of $1,000 or more will be
wired on the next business day. A $4
fee will be deducted from your
account.
o Amounts of less than $1,000 may be
sent by EFT or by check. Funds from
EFT transactions are generally
available by the second business day.
Your bank may charge a fee for this
service.
By exchange
[Clip Art] o Accounts of any type. o Obtain a current prospectus for the
fund into which you are exchanging by
o Sales of any amount. Internet or by calling your financial
representative or Signature Services.
o Log on to www.jhfunds.com to process
exchanges between your funds.
o Call EASI-Line for automated service
24 hours a day using your touch tone
phone at 1-800-338-8080.
o Call your financial representative or
Signature Services to request an
exchange.
To sell shares through a systematic withdrawal plan, see "Additional investor
services."
10 YOUR ACCOUNT
<PAGE>
Selling shares in writing In certain circumstances, you will need to make your
request to sell shares in writing. You may need to include additional items with
your request, unless they were previously provided to Signature Services and are
still accurate. These items are shown in the table below. You may also need to
include a signature guarantee, which protects you against fraudulent orders. You
will need a signature guarantee if:
o your address of record has changed within the past 30 days
o you are selling more than $100,000 worth of shares
o you are requesting payment other than by a check mailed to the address of
record and payable to the registered owner(s)
You will need to obtain your signature guarantee from a member of the Signature
Guarantee Medallion Program. Most brokers and securities dealers are members of
this program. A notary public CANNOT provide a signature guarantee.
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Seller Requirements for written requests
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[Clip Art]
Owners of individual, joint or o Letter of instruction.
UGMA/UTMA accounts (custodial
accounts for minors). o On the letter, the signatures of all
persons authorized to sign for the
account, exactly as the account is
registered.
o Signature guarantee if applicable (see
above).
Owners of corporate, sole o Letter of instruction.
proprietorship, general partner or
association accounts. o Corporate business/organization
resolution, certified within the past
12 months, or a John Hancock Funds
business/organization certification
form.
o On the letter and the resolution, the
signature of the person(s) authorized
to sign for the account.
o Signature guarantee if applicable (see
above).
Owners or trustees of trust accounts. o Letter of instruction.
o On the letter, the signature(s) of the
trustee(s).
o Copy of the trust document certified
within the past 12 months, or a John
Hancock Funds trust certification
form.
o Signature guarantee if applicable (see
above).
Joint tenancy shareholders with o Letter of instruction signed by
rights of survivorship whose surviving tenant.
co-tenants are deceased.
o Copy of death certificate.
o Signature guarantee if applicable (see
above).
Executors of shareholder estates. o Letter of instruction signed by
executor.
o Copy of order appointing executor,
certified within the past 12 months.
o Signature guarantee if applicable (see
above).
Administrators, conservators, o Call 1-800-225-5291 for instructions.
guardians and other sellers or
account types not listed above.
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Address:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
Phone Number: 1-800-225-5291
Or contact your financial representative for instructions
and assistance.
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YOUR ACCOUNT 11
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TRANSACTION POLICIES
Valuation of shares The net asset value per share (NAV) for each class of the
fund is determined each business day at the close of regular trading on the New
York Stock Exchange (typically 4 P.M. Eastern Time). The fund uses market prices
in valui ng portfolio securities, but may use fair-value estimates if reliable
market prices are unavailable. The fund may also value securities at fair value
if the value of these securities has been materially affected by events
occurring after the close of a foreign market. Foreign stock or other portfolio
securities held by the fund may trade on U.S. holidays and weekends, even though
the fund's shares will not be priced on those days. This may change the fund's
NAV on days when you cannot buy or sell shares.
Buy and sell prices When you buy shares, you pay the NAV plus any applicable
sales charges, as described earlier. When you sell shares, you receive the NAV
minus any applicable deferred sales charges.
Execution of requests Each fund is open on those days when the New York Stock
Exchange is open, typically Monday through Friday. Buy and sell requests are
executed at the next NAV to be calculated after Signature Services receives your
request in good order.
At times of peak activity, it may be difficult to place requests by phone.
During these times, consider using EASI-Line, accessing www.jhfunds.com, or
sending your request in writing.
In unusual circumstances, any fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to three business days
or longer, as allowed by federal securities laws.
Telephone transactions For your protection, telephone requests may be recorded
in order to verify their accuracy. Also for your protection, telephone
redemption transactions are not permitted on accounts whose names or addresses
have changed within the past 30 days. Proceeds from telephone transactions can
only be mailed to the address of record.
Exchanges You may exchange shares of one John Hancock fund for shares of the
same class of any other, generally without paying any additional sales charges.
The registration for both accounts involved must be identical. Class B and Class
C shares will continue to age from the original date and will retain the same
CDSC rate. However, if the new fund's CDSC rate is higher, then the rate will
increase. A CDSC rate that has increased will drop again with a future exchange
into a fund with a lower rate.
To protect the interests of other investors in the fund, a fund may cancel the
exchange privileges of any parties that, in the opinion of the fund, are using
market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. A fund may also refuse any exchange order.
A fund may change or cancel its exchange policies at any time, upon 60 days'
notice to its shareholders.
Certificated shares The fund no longer issues share certificates. Shares are
electronically recorded. Any existing certificated shares can only be sold by
returning the certificated shares 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.
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DIVIDENDS AND ACCOUNT POLICIES
Account statements In general, you will receive account statements as follows:
o after every transaction (except a dividend reinvestment) that affects your
account balance
o after any changes of name or address of the registered owner(s)
o in all other circumstances, every quarter
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
Dividends The fund generally distributes most or all of its net earnings
annually in the form of dividends. Any capital gains are distributed annually.
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.
12 YOUR ACCOUNT
<PAGE>
Taxability of dividends Dividends you receive from a fund, whether reinvested or
taken as cash, are generally considered taxable. Dividends from a fund's income
and short-term capital gains are taxable as ordinary income. Dividends from a
fund's long-term capital gains are taxable at a lower rate. Whether gains are
short-term or long-term depends on the fund's holding period. Some dividends
paid in January may be taxable as if they had been paid the previous December.
Dividends may include a return of capital.
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.
Taxability of transactions Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.
Small accounts (non-retirement only) If you draw down a non-retirement account
so that its total value is less than $1,000, you may be asked to purchase more
shares within 30 days. If you do not take action, your fund may close out your
account and mail you the proceeds. Alternatively, Signature Services may charge
you $10 a year to maintain your account. You will not be charged a CDSC if your
account is closed for this reason, and your account will not be closed if its
drop in value is due to fund performance or the effects of sales charges.
--------------------------------------------------------------------------------
ADDITIONAL INVESTOR SERVICES
Monthly Automatic Accumulation Program (MAAP) MAAP lets you set up regular
investments from your paycheck or bank account to the John Hancock fund(s) of
your choice. You determine the frequency and amount of your investments, and you
can terminate your program at any time. To establish:
o Complete the appropriate parts of your accou nt application.
o If you are using MAAP to open an account, make out a check ($25 minimum)
for your first investment amount payable to "John Hancock Signature
Services, Inc." Deliver your check and application to your financial
representative or Signature Services.
Systematic withdrawal plan This plan may be used for routine bill payments or
periodic withdrawals from your account. To establish:
o Make sure you have at least $5,000 worth of shares in your account.
o Make sure you are not planning to invest more money in this account
(buying shares during a period when you are also selling shares of the
same fund is not advantageous to you, because of sales charges).
o Specify the payee(s). The payee may be yourself or any other party, and
there is no limit to the number of payees you may have, as long as they
are all on the same payment schedule.
o Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
o Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial
representative or Signature Services.
Retirement plans John Hancock Funds offers a range of retirement plans,
including traditional, Roth and Education IRAs, SIMPLE plans, SEPs, 401(k) plans
and other pension and profit-sharing plans. Using these plans, you can invest in
any John Hancock fund (except tax-free income funds) with a low minimum
investment of $250 or, for some group plans, no minimum investment at all. To
find out more, call Signature Services at 1-800-225-5291.
YOUR ACCOUNT 13
<PAGE>
Fund details
--------------------------------------------------------------------------------
BUSINESS STRUCTURE
The diagram below shows the basic business structure used by the fund. The
fund's board of trustees oversees the fund's business activities and retains the
services of the various firms that carry out the fund's operations.
The trustees have the power to change the fund's investment goal without
shareholderapproval.
The management firm The fund is managed by John Hancock Advisers, Inc. Founded
in 1968, John Hancock Advisers is a wholly owned subsidiary of John Hancock
Financial Services, Inc. and manages more than $30 billion in assets.
-----------------
Shareholders
-----------------
Distribution and
shareholder services
-------------------------------------------------
Financial services firms and
their representatives
Advise current and prospective share-
holders on their fund investments, often
in the context of an overall financial plan.
-------------------------------------------------
-------------------------------------------------
Principal distributor
John Hancock Funds, Inc.
Markets the fund and distributes shares
through selling brokers, financial planners
and other financial representatives.
-------------------------------------------------
------------------------------------------------------
Transfer agent
John Hancock Signature Services, Inc.
Handles shareholder services, including record-
keeping and statements, distribution of dividends
and processing of buy and sell requests.
------------------------------------------------------
------------------------------------
Subadvisers
American Fund Advisors, Inc.
1415 Kellum Place
Garden City, NY 11530
Mercury Asset
Management US
800 Scudders Hill Road
Plainsboro, NJ 08536
Provide portfolio
management to the fund.
------------------------------------
------------------------------------
Investment adviser
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
Manages the fund's business and
investment activities.
------------------------------------
------------------------------------
Custodian
Brown Brothers
Harriman & Co.
Holds the fund's assets, settles all
portfolio trades and collects most of
the valuation data required for
calculating the fund's NAV.
------------------------------------
Asset
management
------------------------------------
Trustees
Oversee the fund's activities.
------------------------------------
14 FUND DETAILS
<PAGE>
For more information
--------------------------------------------------------------------------------
Two documents are available that offer further information on John Hancock
Growth Trends fund:
Annual/Semiannual Report to Shareholders
Includes financial statements, a discussion of the market conditions and
investment strategies that significantly affected performance, as well as the
auditors' report (in annual report only).
Statement of Additional Information (SAI)
The SAI contains more detailed information on all aspects of the fund. The
current annual report is included in the SAI.
A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference into (is legally a part of) this prospectus.
To request a free copy of the current annual/semiannual report or the SAI,
please contact John Hancock:
By mail:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
By phone: 1-800-225-5291
By EASI-Line: 1-800-338-8080
By TDD: 1-800-544-6713
On the Internet: www.jhfunds.com
Or you may view or obtain these documents from the SEC:
In person: at the SEC's Public Reference Room in Washington, DC. For access to
the Reference Room call 1-202-942-8090
By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-0102
(duplicating fee required)
By electronic request: [email protected] (duplicating fee required)
On the Internet: www.sec.gov
[LOGO] JOHN HANCOCK FUNDS John Hancock Funds, Inc.
A Global Investment Management Firm 101 Huntington Avenue
Boston MA 02199-7603
(C)2000 John Hancock Funds, Inc.
GTOPN 9/00
<PAGE>
JOHN HANCOCK GROWTH TRENDS FUND
Class A, Class B and Class C Shares
Statement of Additional Information
August 28, 2000
This Statement of Additional Information provides information about John Hancock
Growth Trends Fund (the "Fund"), in addition to the information that is
contained in the Fund's current Prospectus (the "Prospectus"). The Fund is a
diversified series of John Hancock Equity Trust (the "Trust").
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus, a copy of which can be obtained free of
charge by writing or telephoning:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
1-(800)-225-5291
TABLE OF CONTENTS
Page
Organization of the Fund.............................................. 2
Investment Objective and Policies..................................... 2
Investment Restrictions............................................... 15
Those Responsible for Management...................................... 17
Investment Advisory and Other Services................................ 24
Distribution Contracts................................................ 27
Sales Compensation.................................................... 28
Net Asset Value....................................................... 30
Initial Sales Charge on Class A and Class C Shares.................... 31
Deferred Sales Charge on Class B and Class C Shares................... 33
Special Redemptions................................................... 37
Additional Services and Programs...................................... 37
Purchases and Recemptions Through Third Parties....................... 39
Description of the Fund's Shares...................................... 39
Tax Status............................................................ 41
Calculation of Performance ........................................... 46
Brokerage Allocation.................................................. 48
Transfer Agent Services............................................... 50
Custody of Portfolio.................................................. 50
Independent Auditors.................................................. 50
Appendix A - Description of Investment Ratings........................ A-1
Financial Statements.................................................. F-1
1
<PAGE>
ORGANIZATION OF THE FUND
The Fund is a series of the Trust, an open-end investment management company
organized as a Massachusetts business trust under the laws of The Commonwealth
of Massachusetts. Prior to August 28, 2000, the Trust was named John Hancock
Special Equities Fund.
John Hancock Advisers, Inc. (the "Adviser") is the Fund's investment adviser.
The Adviser is an indirect, wholly-owned subsidiary of John Hancock Life
Insurance Company (formerly John Hancock Mutual Life Insurance Company) (the
"Life Company"), a Massachusetts life insurance company chartered in 1862 with
national headquarters at John Hancock Place, Boston, Massachusetts. The Life
Company is wholly owned by John Hancock Financial Services, Inc., a Delaware
corporation organized in February, 2000.
The Fund has two sub-advisers: American Fund Advisors, Inc. and Mercury Asset
Management US a division of Fund Asset Management, L.P. ("AFA" and "Mercury,"
respectively).
The Fund will commence operations and close to new investors and subsequent
investments on September 22, 2000.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the Fund's investment
objective and policies discussed in the Prospectus. Appendix A contains further
information describing investment risk. The investment objective of the Fund is
not fundamental and may be changed by the Trustees without shareholder approval.
There is no assurance that the Fund will achieve its investment objective.
The investment objective of the Fund is to seek long-term growth of capital. The
Fund will invest in a number of industry groups without concentration in any
particular industry. The Fund's investments will be subject to the market
fluctuation and risks inherent in all securities.
The Fund will normally invest approximately 1/3 of its total assets in equity
securities of financial services companies, 1/3 of its total assets in equity
securities of healthcare companies and 1/3 of its total assets in equity
securities of technology companies. Annually the Adviser will reallocate assets
among three sectors to achieve an approximate weighting of 1/3 of total assets
in each sector. In addition, cash inflows into the Fund will be allocated in an
effort to maintain an allocation of 1/3 of total assets in each sector. Equity
securities include common and preferred stocks and their equivalents (including
rights and warrants to purchase and securities convertible into such stocks).
Because the Fund focuses on only 3 economic sectors the Fund may be subject to
greater market volatility than a fund that does not concentrate in particular
economic sectors or industries. Thus, it is recommended that an investment in
the Fund be only a portion of your overall investment portfolio.
For temporary defensive purposes or to meet redemptions, the Fund may hold cash
or invest in US government fixed income securities. Therefore, these investments
will be outside of the financial services, healthcare and technology sectors and
will be held in those proportions considered by the Adviser, AFA and Mercury to
be best considering prevailing economic and market conditions. These investments
may prevent the fund from achieving its investment objective.
The Financial Services Sector. A financial services company is a firm that in
its most recent fiscal year either (i) derived at least 50% of its revenues or
earnings from financial services activities, or (ii) devoted at least 50% of its
assets to such activities. Financial services companies provide financial
services to consumers and businesses and include the following types of U.S. and
2
<PAGE>
foreign firms: commercial banks, thrift institutions and their holding
companies; financial holding companies; consumer and industrial finance
companies; diversified financial services companies; investment banks;
securities brokerage and investment advisory firms; financial technology
companies; real estate-related firms; leasing firms; insurance brokerages; and
various firms in all segments of the insurance industry such as multi-line,
property and casualty, and life insurance companies and insurance holding
companies.
The Fund's management team invests in financial services companies that are
currently undervalued, appear to be positioned for a merger, or are in a
position to benefit from regulatory changes. The team believes that the
Gramm-Leach-Bliley Act, which allows banks to acquire investment and insurance
firms, should reinforce the ongoing pattern of consolidation in the banking and
investment sectors.
Risks of the Financial Services Sector. Since 1/3 of the Fund's investments will
be concentrated in the financial services sector, it will be subject to risks in
addition to those that apply to the general equity markets. Events may occur
which significantly affect the sector as a whole or a particular segment in
which the Fund invests.
In addition, most financial services companies are subject to extensive
governmental regulation which limits their activities and may (as with insurance
rate regulation) affect the ability to earn a profit from a given line of
business. Certain financial services businesses are subject to intense
competitive pressures, including market share and price competition. The removal
of regulatory barriers to participation in certain segments of the financial
services sector may also increase competitive pressures on different types of
firms. For example, recent legislation removing traditional barriers between
banking and investment banking activities will allow large commercial banks to
compete for business that previously was the exclusive domain of securities
firms. Similarly, the removal of regional barriers in the banking industry has
intensified competition within the industry. The availability and cost of funds
to financial services firms is crucial to their profitability. Consequently,
volatile interest rates and general economic conditions can adversely affect
their financial performance.
Financial services companies in foreign countries are subject to similar
regulatory and interest rate concerns. In particular, government regulation in
certain foreign countries may include controls on interest rates, credit
availability, prices and currency movements. In some cases, foreign governments
have taken steps to nationalize the operations of banks and other financial
services companies.
The Adviser believes that the ongoing deregulation of many segments of the
financial services sector continues to provide new opportunities for issuers in
this sector. As deregulation of various financial services businesses continues
and new segments of the financial services sector are opened to certain larger
financial services firms formerly prohibited from doing business in these
segments, (such as national and money center banks) certain established
companies in these market segments (such as regional banks or securities firms)
may become attractive acquisition candidates for the larger firm seeking
entrance into the segment. Typically, acquisitions accelerate the capital
appreciation of the shares of the company to be acquired.
In addition, financial services companies in growth segments (such as securities
firms during times of stock market expansion) or geographically linked to areas
experiencing strong economic growth (such as certain regional banks) are likely
to participate in and benefit from such growth through increased demand for
their products and services. Many financial services companies which are
actively and aggressively managed and are expanding services as deregulation
opens up new opportunities also show potential for capital appreciation,
particularly in expanding into areas where nonregulatory barriers to entry are
low.
3
<PAGE>
The Adviser will seek to invest in those financial services companies that it
believes are well positioned to take advantage of the ongoing changes in the
financial services sector. A financial services company may be well positioned
for a number of reasons. It may be an attractive acquisition for another company
wishing to strengthen its presence in a line of business or a geographic region
or to expand into new lines of business or geographic regions, or it may be
planning a merger to strengthen its position in a line of business or a
geographic area. The financial services company may be engaged in a line or
lines of business experiencing or likely to experience strong economic growth;
it may be linked to a geographic region experiencing or likely to experience
strong economic growth and be actively seeking to participate in such growth; or
it may be expanding into financial services or geographic regions previously
unavailable to it (due to an easing of regulatory constraints) in order to take
advantage of new market opportunities.
The Healthcare Sector. A healthcare company is a company that derives a
substantial portion (i.e. more than 50%) of their sales from products and
services in healthcare. These companies may be in a variety of industries within
the general healthcare sector including:
o Pharmaceutical companies of various types
o Companies that design, manufacture, sell or supply medical, dental and optical
products, hardware or services
o Companies involved in biotechnology, medical, diagnostic and biochemical
research and development
o Companies involved in the ownership and/or operation of healthcare facilities
While the management team seeks investments with a healthcare orientation, it
has flexibility with respect to investing in specific industries within the
general healthcare sector. In addition, Mercury may, in order to maximize
opportunity and attempt to reduce risk, invest in companies in various stages of
development including companies with small market capitalizations and venture
capital investments in development stage companies.
Risks of the Healthcare Sector. The third of the Fund's investments concentrated
in the healthcare sector subject the Fund to the particular risks associated
with that sector. This makes the Fund more vulnerable to price changes of
healthcare company securities and factors that affect the healthcare sector than
a fund that invests across a more broad diversity of economic sectors.
Healthcare companies are strongly affected by worldwide scientific or
technological developments. Their products may rapidly become obsolete. Many
healthcare companies are also subject to significant government regulation and
may be affected by changes in governmental policies. A number of legislative
proposals concerning healthcare have been introduced or considered by the U.S.
Congress in recent years. These span a wide range of topics, including cost
control, national health insurance, incentives for compensation in the provision
of health care services, tax incentives and penalties related to health care
insurance premiums, and promotion of prepaid healthcare plans. The Fund cannot
predict whether any of these proposals will be enacted or what effect it may
have. Some of the companies in which the Fund invests may be in early stages of
development. These companies are more likely than more developed companies to
lose substantial value if they experience problems developing their products or
if there are changes in their management.
4
<PAGE>
The Technology Sector. Technology companies are companies that rely extensively
on technology in their product development or operations. These companies are in
fields such as: computer software, hardware and Internet services;
telecommunications; electronics; data management and storage.
Investments in U.S. and foreign companies that rely extensively on technology in
product development or operations may be expected to benefit from scientific
developments and the application of technical advances resulting from improving
technology in many different fields, such as computer software and hardware
(including internet-related technology), semiconductors, telecommunications,
defense and commercial electronics, data storage and retrieval, biotechnology
and others. Generally, investments will be made in securities of a company that
relies extensively on technology in product development or operations only if a
significant part of its assets are invested in, or a significant part of its
total revenue or net income is derived from, technology.
Risks of Technology-Intensive Companies. Since 1/3 of the Fund's investments are
concentrated in the technology sector, it will be subject to risks in addition
to those that apply to the general equity markets. Securities prices of the
companies in which the Fund invests have tended to be subject to greater
volatility than securities prices in many other industries, due to particular
factors affecting these industries. Competitive pressures may also have a
significant effect on the financial condition of technology-intensive companies.
For example, if the development of new technology continues to advance at an
accelerated rate, and the number of companies and product offerings continues to
expand, the companies could become increasingly sensitive to short product
cycles and aggressive pricing. Accordingly, the Fund's performance will be
particularly susceptible to factors affecting these companies as well as the
economy as a whole.
Common stocks. Common stocks are shares of a corporation or other entity that
entitle the holder to a pro rata share of the profits of the corporation, if
any, without preference over any other shareholder or class of shareholders,
including holders of such entity's preferred stock and other senior equity.
Ownership of common stock usually carries with it the right to vote and,
frequently, an exclusive right to do so. Common stocks have the potential to
outperform fixed-income securities over the long term. Common stocks provide the
most potential for growth, yet are the more volatile of the two asset classes.
Preferred stocks. Preferred stock generally pays dividends in cash (or
additional shares of preferred stock) at a defined rate but, unlike interest
payments on debt securities, preferred stock dividends are payable only if
declared by the issuer's board of directors. Dividends on preferred stock may be
cumulative, meaning that, in the event the issuer fails to make one or more
dividend payments on the preferred stock, no dividends may be paid on the
issuer's common stock until all unpaid preferred stock dividends have been paid.
Preferred stock also may be subject to optional or mandatory redemption
provisions.
Convertible securities. Investments in convertible securities are not subject to
the rating criteria with respect to non-convertible debt obligations. As with
all debt securities, the market value of convertible securities tends to decline
as interest rates increase and, conversely, to increase as interest rates
decline. The market value of convertible securities can also be heavily
dependent upon the changing value of the equity securities into which such
securities are convertible, depending on whether the market price of the
underlying security exceeds the conversion price. Convertible securities
generally rank senior to common stocks in an issuer's capital structure and
consequently entail less risk than the issuer's common stock. However, the
extent to which such risk is reduced depends upon the degree to which the
convertible security sells above its value as a fixed-income security.
5
<PAGE>
Investment in Foreign Securities. The Fund may invest in the securities of
foreign issuers in the form of sponsored and unsponsored American Depository
Receipts ("ADRs"), U.S. dollar-denominated securities of foreign issuers traded
on U.S. exchanges and foreign securities traded in foreign and local markets on
foreign exchanges.
ADRs (sponsored and unsponsored) are receipts, typically issued by U.S. banks,
which evidence ownership of underlying securities issued by a foreign
corporation. ADRs are publicly traded on a U.S. stock exchange or in the
over-the-counter market. An investment in foreign securities including ADRs may
be affected by changes in currency rates and in exchange control regulations.
Issuers of unsponsored ADRs are not contractually obligated to disclose material
information including financial information, in the United States and,
therefore, there may not be a correlation between such information and the
market value of the unsponsored ADR.
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
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.
6
<PAGE>
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.
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.
The U.S. Government has from time to time in the past imposed restrictions,
through taxation and otherwise, on foreign investments by U.S. investors such as
the Fund. If such restrictions should be reinstituted, it might become necessary
for the Fund to invest all or substantially all of its assets in U.S.
securities. In such event, the Fund would review its investment objective and
investment policies to determine whether changes are appropriate.
The Fund's ability and decisions to purchase or sell portfolio securities may be
affected by laws or regulations relating to the convertibility and repatriation
of assets. Because the shares of the Fund are redeemable on a daily basis in
U.S. dollars, the Fund intends to manage its portfolio so as to give reasonable
assurance that it will be able to obtain U.S. dollars. Under present conditions,
it is not believed that these considerations will have any significant effect on
its portfolio strategy.
Foreign Currency Transactions. The Fund's foreign currency 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
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
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 as deemed appropriate by the Adviser and
Sub-Advisers.
7
<PAGE>
If the Fund purchases a forward contract or sells a forward contract for
non-hedging purposes, the Fund will segregate cash or liquid securities in a
separate account of the Fund in an amount equal to the value of the Fund's total
assets committed to the consummation of such forward contract. 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 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.
Repurchase Agreements. In a repurchase agreement the Fund buys a security for a
relatively short period (usually not more than 7 days) subject to the obligation
to sell it back to the issuer at a fixed time and price, plus accrued interest.
The Fund will enter into repurchase agreements only with member banks of the
Federal Reserve System and with "primary dealers" in U.S. Government securities.
The Adviser will continuously monitor the creditworthiness of the parties with
whom the Fund enters into repurchase agreements.
The Fund has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities and during the period in which the Fund
seeks to enforce its rights thereto, possible subnormal levels of income, lack
of access to income during this period, and the expense of enforcing its rights.
Restricted Securities. The Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933 ("1933 Act"),
including commercial paper issued in reliance on Section 4(2) of the 1933 Act
and securities offered and sold to "qualified institutional buyers" under Rule
144A under the 1933 Act. The Fund will not invest more than 15% of its net
assets in illiquid investments. If the Trustees determine, based upon a
continuing review of the trading markets for specific Section 4(2) paper or Rule
144A securities, that they are liquid, they will not be subject to the 15% limit
on illiquid investments. The Trustees have adopted guidelines and delegated to
the Adviser the daily function of determining the monitoring and liquidity of
restricted securities. The Trustees, however, will retain sufficient oversight
and be ultimately responsible for the determinations. The Trustees will
carefully monitor the Fund's investments in these securities, focusing on such
important factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund if qualified institutional buyers become for a
time uninterested in purchasing these restricted securities.
8
<PAGE>
Options on Securities and Securities Indices. The Fund may purchase and write
(sell) call and put options on securities in which it may invest or on any
securities index based on securities in which it may invest. These options may
be listed on national domestic securities exchanges or traded in the
over-the-counter market. The Fund may write covered put and call options and
purchase put and call options to enhance total return, as a substitute for the
purchase or sale of securities, or to protect against declines in the value of
portfolio securities and against increases in the cost of securities to be
acquired.
Writing Covered Options. A call option on securities written by the Fund
obligates the Fund to sell specified securities to the holder of the option at a
specified price if the option is exercised at any time before the expiration
date. A put option on securities written by the Fund obligates the Fund to
purchase specified securities from the option holder at a specified price if the
option is exercised at any time before the expiration date. Options on
securities indices are similar to options on securities, except that the
exercise of securities index options requires cash settlement payments and does
not involve the actual purchase or sale of securities. In addition, securities
index options are designed to reflect price fluctuations in a group of
securities or segment of the securities market rather than price fluctuations in
a single security. Writing covered call options may deprive the Fund of the
opportunity to profit from an increase in the market price of the securities in
its portfolio. Writing covered put options may deprive the Fund of the
opportunity to profit from a decrease in the market price of the securities to
be acquired for its portfolio.
All call and put options written by the Fund are covered. A written call option
or put option may be covered by (i) maintaining cash or liquid securities in a
segregated account with a value at least equal to the Fund's obligation under
the option, (ii) entering into an offsetting forward commitment and/or (iii)
purchasing an offsetting option or any other option which, by virtue of its
exercise price or otherwise, reduces the Fund's net exposure on its written
option position. A written call option on securities is typically covered by
maintaining the securities that are subject to the option in a segregated
account. The Fund may cover call options on a securities index by owning
securities whose price changes are expected to be similar to those of the
underlying index.
The Fund may terminate its obligations under an exchange traded call or put
option by purchasing an option identical to the one it has written. Obligations
under over-the-counter options may be terminated only by entering into an
offsetting transaction with the counterparty to such option. Such purchases are
referred to as "closing purchase transactions."
Purchasing Options. The Fund would normally purchase call options in
anticipation of an increase, or put options in anticipation of a decrease
("protective puts") in the market value of securities of the type in which it
may invest. The Fund may also sell call and put options to close out its
purchased options.
The purchase of a call option would entitle the Fund, in return for the premium
paid, to purchase specified securities at a specified price during the option
period. The Fund would ordinarily realize a gain on the purchase of a call
option if, during the option period, the value of such securities exceeded the
sum of the exercise price, the premium paid and transaction costs; otherwise the
Fund would realize either no gain or a loss on the purchase of the call option.
The purchase of a put option would entitle the Fund, in exchange for the premium
paid, to sell specified securities at a specified price during the option
period. The purchase of protective puts is designed to offset or hedge against a
decline in the market value of the Fund's portfolio securities. Put options may
also be purchased by the Fund for the purpose of affirmatively benefiting from a
decline in the price of securities which it does not own. The Fund would
ordinarily realize a gain if, during the option period, the value of the
9
<PAGE>
underlying securities decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise the Fund would realize either no
gain or a loss on the purchase of the put option. Gains and losses on the
purchase of put options may be offset by countervailing changes in the value of
the Fund's portfolio securities.
The Fund's options transactions will be subject to limitations established by
each of the exchanges, boards of trade or other trading facilities on which such
options are traded. These limitations govern the maximum number of options in
each class which may be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options are written or
purchased on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or more
brokers. Thus, the number of options which the Fund may write or purchase may be
affected by options written or purchased by other investment advisory clients of
the Adviser. An exchange, board of trade or other trading facility may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.
Risks Associated with Options Transactions. There is no assurance that a liquid
secondary market on a domestic or foreign options exchange will exist for any
particular exchange-traded option or at any particular time. If the Fund is
unable to effect a closing purchase transaction with respect to covered options
it has written, the Fund will not be able to sell the underlying securities or
dispose of assets held in a segregated account until the options expire or are
exercised. Similarly, if the Fund is unable to effect a closing sale transaction
with respect to options it has purchased, it would have to exercise the options
in order to realize any profit and will incur transaction costs upon the
purchase or sale of underlying securities.
Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options). If trading were discontinued, the
secondary market on that exchange (or in that class or series of options) would
cease to exist. However, outstanding options on that exchange that had been
issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
The Fund's ability to terminate over-the-counter options is more limited than
with exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. The
Adviser will determine the liquidity of each over-the-counter option in
accordance with guidelines adopted by the Trustees.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The successful use of options
depends in part on the Adviser's ability to predict future price fluctuations
and, for hedging transactions, the degree of correlation between the options and
securities markets.
10
<PAGE>
Futures Contracts and Options on Futures Contracts. To seek to increase total
return or hedge against changes in interest rates or securities prices, the Fund
may purchase and sell various kinds of futures contracts and purchase and write
call and put options on these futures contracts. The Fund may also enter into
closing purchase and sale transactions with respect to any of these contracts
and options. The futures contracts may be based on various securities,
securities indices and any other financial instruments and indices. All futures
contracts entered into by the Fund are traded on U.S. exchanges or boards of
trade that are licensed, regulated or approved by the Commodity Futures Trading
Commission ("CFTC").
Futures Contracts. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments for an
agreed price during a designated month (or to deliver the final cash settlement
price, in the case of a contract relating to an index or otherwise not calling
for physical delivery at the end of trading in the contract).
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities will usually be liquidated in
this manner, the Fund may instead make, or take, delivery of the underlying
securities whenever it appears economically advantageous to do so. A clearing
corporation associated with the exchange on which futures contracts are traded
guarantees that, if still open, the sale or purchase will be performed on the
settlement date.
Hedging and Other Strategies. Hedging is an attempt to establish with more
certainty than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that the Fund proposes to acquire. When
securities prices are falling, the Fund can seek to offset a decline in the
value of its current portfolio securities through the sale of futures contracts.
When securities prices are rising, the Fund, through the purchase of futures
contracts, can attempt to secure better rates or prices than might later be
available in the market when it effects anticipated purchases.
The Fund may, for example, take a "short" position in the futures market by
selling futures contracts in an attempt to hedge against an anticipated decline
in market prices that would adversely affect the value of the Fund's portfolio
securities. Such futures contracts may include contracts for the future delivery
of securities held by the Fund or securities with characteristics similar to
those of the Fund's portfolio securities.
If, in the opinion of the Adviser, there is a sufficient degree of correlation
between price trends for the Fund's portfolio securities and futures contracts
based on other financial instruments, securities indices or other indices, the
Fund may also enter into such futures contracts as part of its hedging strategy.
Although under some circumstances prices of securities in the Fund's portfolio
may be more or less volatile than prices of such futures contracts, the Adviser
will attempt to estimate the extent of this volatility difference based on
historical patterns and compensate for any differential by having the Fund enter
into a greater or lesser number of futures contracts or by attempting to achieve
only a partial hedge against price changes affecting the Fund's portfolio
securities.
When a short hedging position is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation in the value
of the futures position. On the other hand, any unanticipated appreciation in
the value of the Fund's portfolio securities would be substantially offset by a
decline in the value of the futures position.
11
<PAGE>
On other occasions, the Fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices then available in the applicable market to be less favorable
than prices that are currently available. The Fund may also purchase futures
contracts as a substitute for transactions in securities, to alter the
investment characteristics of portfolio securities or to gain or increase its
exposure to a particular securities market.
Options on Futures Contracts. The Fund may purchase and write options on futures
for the same purposes as its transactions in futures contracts. The purchase of
put and call options on futures contracts will give the Fund the right (but not
the obligation) for a specified price to sell or to purchase, respectively, the
underlying futures contract at any time during the option period. As the
purchaser of an option on a futures contract, the Fund obtains the benefit of
the futures position if prices move in a favorable direction but limits its risk
of loss in the event of an unfavorable price movement to the loss of the premium
and transaction costs.
The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of the Fund's assets. By writing a call
option, the Fund becomes obligated, in exchange for the premium (upon exercise
of the option) to sell a futures contract if the option is exercised, which may
have a value higher than the exercise price. Conversely, the writing of a put
option on a futures contract generates a premium which may partially offset an
increase in the price of securities that the Fund intends to purchase. However,
the Fund becomes obligated (upon exercise of the option) to purchase a futures
contract if the option is exercised, which may have a value lower than the
exercise price. The loss incurred by the Fund in writing options on futures is
potentially unlimited and may exceed the amount of the premium received.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
Other Considerations. The Fund will engage in futures and related options
transactions either for bona fide hedging purposes or to seek to increase total
return as permitted by the CFTC. To the extent that the Fund is using futures
and related options for hedging purposes, futures contracts will be sold to
protect against a decline in the price of securities that the Fund owns or
futures contracts will be purchased to protect the Fund against an increase in
the price of securities it intends to purchase. The Fund will determine that the
price fluctuations in the futures contracts and options on futures used for
hedging purposes are substantially related to price fluctuations in securities
held by the Fund or securities or instruments which it expects to purchase. As
evidence of its hedging intent, the Fund expects that on 75% or more of the
occasions on which it takes a long futures or option position (involving the
purchase of futures contracts), the Fund will have purchased, or will be in the
process of purchasing, equivalent amounts of related securities in the cash
market at the time when the futures or option position is closed out. However,
in particular cases, when it is economically advantageous for the Fund to do so,
a long futures position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.
To the extent that the Fund engages in nonhedging transactions in futures
contracts and options on futures, the aggregate initial margin and premiums
required to establish these nonhedging positions will not exceed 5% of the net
asset value of the Fund's portfolio, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase.
12
<PAGE>
Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating the Fund to purchase securities, require the Fund to establish a
segregated account consisting of cash or liquid securities in an amount equal to
the underlying value of such contracts and options.
While transactions in futures contracts and options on futures may reduce
certain risks, these transactions themselves entail certain other risks. For
example, unanticipated changes in interest rates, securities prices may result
in a poorer overall performance for the Fund than if it had not entered into any
futures contracts or options transactions.
Perfect correlation between the Fund's futures positions and portfolio positions
will be impossible to achieve. In the event of an imperfect correlation between
a futures position and a portfolio position which is intended to be protected,
the desired protection may not be obtained and the Fund may be exposed to risk
of loss.
Some futures contracts or options on futures may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in a futures contract or related option,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or related option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Fund from closing out
positions and limiting its losses.
Lending of Securities. The Fund may lend portfolio securities to brokers,
dealers and financial institutions if the loan is collateralized by cash or U.S.
Government securities according to applicable regulatory requirements. The Fund
may reinvest any cash collateral in short-term securities and money market
funds. When the Fund lends portfolio securities, there is a risk that the
borrower may fail to return the securities involved in the transaction. As a
result, the Fund may incur a loss or, in the event of the borrower's bankruptcy,
the Fund may be delayed in or prevented from liquidating the collateral. It is a
fundamental policy of the Fund not to lend portfolio securities having a total
value exceeding 33 1/3% of its total assets.
Rights and Warrants. The Fund may purchase warrants and rights which are
securities permitting, but not obligating, their holder to purchase the
underlying securities at a predetermined price subject to the Fund's Investment
Restrictions. Generally, warrants and stock purchase rights do not carry with
them the right to receive dividends or exercise voting rights with respect to
the underlying securities, and they do not represent any rights in the assets of
the issuer. As a result, an investment in warrants and rights may be considered
to entail greater investment risk than certain other types of investments. In
addition, the value of warrant and rights does not necessarily change with the
value of the underlying securities, and they cease to have value if they are not
exercised on or prior to their expiration date. Investment in warrants and
rights increases the potential profit or loss to be realized from the investment
of a given amount of the Fund's assets as compared with investing the same
amount in the underlying stock.
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.
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<PAGE>
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.
Government Securities. The Fund may invest in government securities. However,
under normal market conditions, Dividend Performers Fund, Small Capitalization
Growth Fund, Medium Capitalization Growth Fund and International Equity Fund
will not invest in any fixed income securities, with the exception of cash
equivalents (which include U.S. Government securities maturing in 90 days or
less). In abnormal market conditions, the fund may temporarily invest most or
all of its total assets in U.S. Government securities and U.S. Government agency
securities. Certain U.S. Government securities, including U.S. Treasury bills,
notes and bonds, and Government National Mortgage Association certificates
("GNMA"), are supported by the full faith and credit of the United States.
Certain other U.S. Government securities, issued or guaranteed by Federal
agencies or government sponsored enterprises, are not supported by the full
faith and credit of the United States, but may be supported by the right of the
issuer to borrow from the U.S. Treasury. These securities include obligations of
the Federal Home Loan Mortgage Corporation ("FHLMC"), and obligations supported
by the credit of the instrumentality, such as Federal National Mortgage
Association Bonds ("FNMA"). No assurance can be given that the U.S. Government
will provide financial support to such Federal agencies, authorities,
instrumentalities and government sponsored enterprises in the future.
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 also be necessary each quarter in order for the Adviser
to reallocate assets among the sectors. Short-term trading may have the effect
of increasing portfolio turnover rate. A high rate of portfolio turnover (100%
or greater) involves correspondingly greater brokerage expenses. The Fund's
portfolio turnover rate is set forth in the table under the caption "Financial
Highlights" in the Prospectus.
14
<PAGE>
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. The following investment restrictions will
not be changed without the approval of a majority of the Fund's outstanding
voting securities which, as used in the Prospectus and this Statement of
Additional Information, means the approval by the lesser of (1) the holders of
67% or more of the Fund's shares represented at a meeting if more than 50% of
the Fund's outstanding shares are present in person or by proxy at that meeting
or (2) more than 50% of the Fund's outstanding shares.
The Fund may not:
(1) Issue senior securities, except as permitted by paragraphs (2), (5) and
(6) below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the deferral of
Trustees' fees, the purchase or sale of options, futures contracts,
forward commitments and repurchase agreements entered into in
accordance with the Fund's investment policies, and within the meaning
of paragraph (6) below, are not deemed to be senior securities.
(2) Borrow money, except for the following extraordinary or emergency
purposes: (i) from banks for temporary or short-term purposes or for
the clearance of transactions in amounts not to exceed 33 1/3% of the
value of the Fund's total assets (including the amount borrowed) taken
at market value; (ii) in connection with the redemption of Fund shares
or to finance failed settlements of portfolio trades without
immediately liquidating portfolio securities or other assets; (iii) in
order to fulfill commitments or plans to purchase additional securities
pending the anticipated sale of other portfolio securities or assets;
and (iv) The Fund may not borrow money for the purpose of leveraging
the Fund's assets. For purposes of this investment restriction, the
deferral of Trustees' fees and transactions in short sales, futures
contracts, options on futures contracts, securities or indices and
forward commitment transactions shall not constitute borrowing.
(3) Act as an underwriter, except to the extent that in connection with the
disposition of portfolio securities, the Fund may be deemed to be an
underwriter for purposes of the 1933 Act.
(4) Purchase or sell real estate except that the Fund may (i) acquire or
lease office space for its own use, (ii) invest in securities of
issuers that invest in real estate or interests therein, (iii) invest
in securities that are secured by real estate or interests therein,
(iv) purchase and sell mortgage-related securities and (v) hold and
sell real estate acquired by the Fund as a result of the ownership of
securities.
(5) Make loans, except that the Fund (i) may lend portfolio securities in
accordance with the Fund's investment policies up to 33 1/3% of the
Fund's total assets taken at market value, (ii) enter into repurchase
agreements, and (iii) purchase all or a portion of an issue of publicly
distributed debt securities, bank loan participation interests, bank
certificates of deposit, bankers' acceptances, debentures or other
securities, whether or not the purchase is made upon the original
issuance of the securities.
(6) Invest in commodities, except the Fund may purchase and sell options on
securities, securities indices and currency, futures contracts on
securities, securities indices and currency and options on such
futures, forward foreign currency exchange contracts, forward
commitments, securities index put or call warrants and repurchase
agreements entered into in accordance with the Fund's investment
policies.
15
<PAGE>
(7) Purchase the securities of issuers conducting their principal activity
in the same industry if, immediately after such purchase, the value of
its investments in such industry would exceed 25% of its total assets
taken at market value at the time of such investment. This limitation
does not apply to investments in obligations of the U.S. Government or
any of its agencies, instrumentalities or authorities.
(8) With respect to 75% of total assets purchase securities of an
issuer (other than the U.S. Government, its agencies, instrumentalities
or authorities), if
(a) such purchase would cause more than 5% of the Fund's total
assets taken at market value to be invested in the securities
of such issuer, or
(b) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held by
the Fund.
In connection with the lending of portfolio securities under paragraph (5)
above, such loans must at all times be fully collateralized and the Fund's
custodian must take possession of the collateral either physically or in book
entry form. Securities used as collateral must be marked to market daily.
Non-Fundamental Investment Restrictions. The following restrictions are
designated as non-fundamental and may be changed by the Trustees without
shareholder approval.
The Fund may not:
(1) Participate on a joint or joint-and-several basis in any securities
trading account. The "bunching" of orders for the sale or purchase of
marketable portfolio securities with other accounts under the
management of the Adviser or any Sub-Adviser to save commissions or to
average prices among them is not deemed to result in a joint securities
trading account.
(2) Purchase securities on margin or make short sales, 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 (i) in connection with arbitrage transactions, (ii) for hedging
the Fund's exposure to an actual or anticipated market decline in the
value of its securities, (iii) to profit from an anticipated decline in
the value of a security, and (iv) obtaining such short-term credits as
may be necessary for the clearance of purchases and sales of
securities.
(3) Purchase a security if, as a result, (i) more than 10% of the Fund's
total assets would be invested in the securities of other investment
companies, (ii) the Fund would hold more than 3% of the total
outstanding voting securities of any one investment company, or (iii)
more than 5% of the Fund's total assets would be invested in the
securities of any one investment company. These limitations do not
apply to (a) the investment of cash collateral, received by the Fund in
connection with lending the Fund's portfolio securities, in the
securities of open- end investment companies or (b) the purchase of
shares of any investment company in connection with a merger,
consolidation, reorganization or purchase of substantially all of the
assets of another investment company. Subject to the above percentage
limitations, the Fund may, in connection with the John Hancock Group of
Funds Deferred Compensation Plan for Independent Trustees/ Directors,
purchase securities of other investment companies within the John
Hancock Group of Funds.
16
<PAGE>
(4) Invests more than 15% of its net assets taken at market value in
illiquid securities.
(5) The Fund will not purchase securities while outstanding borrowings
exceed 5% of the Fund's total assets.
(6) Invest for the purpose of exercising control over or management of any
company.
If a percentage restriction on investment or utilization of assets as set forth
above is adhered to at the time an investment is made, a later change in
percentage resulting from changes in the value of the Fund's assets will not be
considered a violation of the restriction.
The Fund will invest only in countries approved by the Adviser.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by the Trustees of the Trust who elect
officers who are responsible for the day-to-day operations of the Fund and who
execute policies formulated by the Trustees. Several of the officers and
Trustees of the Trust are also Officers or Directors of the Adviser, or Officers
or Directors of the Fund's principal distributor, John Hancock Funds, Inc.
("John Hancock Funds").
17
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
---------------- ---------------- --------------------------
<S> <C> <C>
Stephen L. Brown* Trustee and Chairman Chairman, John Hancock Life Insurance
John Hancock Place Company; Chairman and Director, John
P.O. Box 111 Hancock Advisers, Inc. (the Adviser),
Boston, MA 02117 John Hancock Funds, Inc. (John
July 1937 Hancock Funds), The Berkeley
Financial Group, Inc. (The Berkeley
Group); Director, John Hancock
Subsidiaries, Inc.; John Hancock
Insurance Agency, Inc.; (Insurance
Agency), (until June 1999); Federal
Reserve Bank of Boston (until March
1999); John Hancock Signature
Services, Inc. (Signature Services)
(until January 1997) ; Trustee, John
Hancock Asset Management (until March
1997); Chief Executive Officer, John
Hancock Life Insurance Company (until
June1, 2000).
Maureen R. Ford * Trustee, Vice Chairman, President President, Broker/Dealer Distributor,
101 Huntington Avenue and Chief Executive Officer (1,2) John Hancock Life Insurance Company;
Boston, MA 02199 Vice Chairman, President, Director
March 1950 and Chief Executive Officer, the
Adviser, The Berkeley Group, John
Hancock Funds; Chairman, Director and
President, Insurance Agency, Inc.;
Chairman, Director and Chief
Executive Officer, Sovereign Asset
Management Corporation (SAMCorp.);
Senior Vice President, MassMutual
Insurance Co. (until 1999); Senior
Vice President, Connecticut Mutual
Insurance Co. (until 1996).
-------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined in
the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
17
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
---------------- ---------------- --------------------------
<S> <C> <C>
Dennis S. Aronowitz Trustee Professor of Law, Emeritus, Boston
1216 Falls Boulevard University School of Law (as of
Fort Lauderdale, FL 33327 1996); Director, Brookline Bankcorp.
June 1931
Richard P. Chapman, Jr. Trustee (1) Chairman, President, and Chief
160 Washington Street Executive Officer, Brookline
Brookline, MA 02147 Bankcorp. (lending); Director,
February 1935 Lumber Insurance Companies (fire and
casualty insurance); Trustee,
Northeastern University (education);
Director, Depositors Insurance Fund,
Inc. (insurance).
William J. Cosgrove Trustee Vice President, Senior Banker and
20 Buttonwood Place Senior Credit Officer, Citibank,
Saddle River, NJ 07458 N.A. (retired September 1991);
January 1933 Executive Vice President, Citadel
Group Representatives, Inc.;
Trustee, the Hudson City Savings
Bank (since 1995).
-------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined in
the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
18
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
---------------- ---------------- --------------------------
<S> <C> <C>
Leland O. Erdahl Trustee Director of Uranium Resources
279 Cielo Azul Corporation, Hecla Mining Company,
Corrales, NM 87048 Canyon Resources Corporation and
December 1928 Apollo Gold, Inc.; Director Original
Sixteen to One Mines, Inc. (until
1999); Management Consultant (from
1984-1987 and 1991-1998); Director,
Freeport-McMoran Copper & Gold, Inc.
(until 1997); Vice President, Chief
Financial Officer and Director of
Amax Gold, Inc. (until 1998).
Richard A. Farrell Trustee President of Farrell, Healer & Co.,
The Venture Capital Fund of New England (venture capital management firm)
70 Walnut Street, Suite 120 (since 1980); Prior to 1980,
Wellesley Hills, MA 02481 headed the venture capital group at
November 1932 Bank of Boston Corporation.
Gail D. Fosler Trustee Senior Vice President and Chief
4104 Woodbine Street Economist, The Conference Board
Chevy Chase, MD 20815 (non-profit economic and business
December 1947 research); Director, Unisys Corp.;
DBS Holdings (Singapore) H.B. Fuller Company.
Director, National Bureau of Economic
Research (academic).
William F. Glavin Trustee President Emeritus, Babson College
120 Paget Court - John's Island (as of 1997); Vice Chairman, Xerox
Vero Beach, FL 32963 Corporation (until June 1989);
March 1932 Director, Caldor Inc., Reebok, Inc.
(since 1994) and Inco Ltd.
-------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined in
the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
19
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
---------------- ---------------- --------------------------
<S> <C> <C>
Dr. John A. Moore Trustee President and Chief Executive
1045 No Utah #310 Officer, Institute for Evaluating
Arlington, VA 22201 Health Risks, (nonprofit
February 1939 institution) (since September 1989).
Patti McGill Peterson Trustee Executive Director, Council for
Council For International Exchange of International Exchange of Scholars
Scholars (since January 1998), Vice
3007 Tilden Street, N.W. President, Institute of
Washington, D.C. 20008 International Education (since
May 1943 January 1998); Senior Fellow,
Cornell Institute of Public
Affairs, Cornell University (until
December 1997); President Emerita
of Wells College and St. Lawrence
University; Director, Niagara
Mohawk Power Corporation (electric
utility).
John W. Pratt Trustee Professor of Business Administration
2 Gray Gardens East Emeritus, Harvard University
Cambridge, MA 02138 Graduate School of Business
September 1931 Administration (as of June 1998).
-------------------
* 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.
20
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
---------------- ---------------- --------------------------
<S> <C> <C>
Richard S. Scipione * Trustee (1) General Counsel, John Hancock Life
John Hancock Place Insurance Company; Director, the
P.O. Box 111 Adviser, John Hancock Funds,
Boston, MA 02117 Signator Investors, Inc., John
August 1937 Hancock Subsidiaries, Inc.,
SAMCorp., NM Capital, The Berkeley
Group, JH Networking Insurance
Agency, Inc.; Insurance Agency, Inc.
(until June 1999), Signature
Services (until January 1997).
-------------------
* 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.
21
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
---------------- ---------------- --------------------------
<S> <C> <C>
William L. Braman Executive Vice President and Chief Executive Vice President and Chief
101 Huntington Avenue Investment Officer Investment Officer, each of the John
Boston, MA 02199 Hancock Funds; Executive Vice
December 1953 President and Chief Investment
Officer, Barring Asset Management,
London UK (until May 2000).
Osbert M. Hood Executive Vice President and Chief Executive Vice President and Chief
101 Huntington Avenue Financial Officer Financial Officer, each of the John
Boston, MA 02199 Hancock Funds; Executive Vice
August 1952 President, Treasurer and Chief
Financial Officer of the Adviser,
the Berkeley Group, John Hancock
Funds, SAMCorp. and NM Capital;
Senior Vice President, Chief
Financial Officer and Treasurer,
Signature Services; Director
Indocam Japan Limited; Vice
President and Chief Financial
Officer, John Hancock Mutual Life
Insurance Company, Retail Sector
(until 1997).
Susan S. Newton Vice President, Secretary and Chief Vice President and Chief Legal
101 Huntington Avenue Legal Officer Officer the Adviser; John Hancock
Boston, MA 02199 Funds; Vice President Signature
March 1950 Services (until May 2000), The
Berkeley Group, NM Capital and
SAMCorp.
James J. Stokowski Vice President, Treasurer and Chief Vice President, the Adviser.
101 Huntington Avenue Accounting Officer
Boston, MA 02199
November 1946
-------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined in
the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
22
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
---------------- ---------------- --------------------------
<S> <C> <C>
Thomas H. Connors Vice President and Compliance Vice President and Compliance
101 Huntington Avenue Officer Officer, the Adviser; Vice
Boston, MA 02199 President, John Hancock Funds, Inc.
September 1959
-------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined in
the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
</TABLE>
23
<PAGE>
The following table provides information regarding the compensation paid by the
Fund and the other investment companies in the John Hancock Fund Complex to the
Independent Trustees for their services. Messrs. Brown, Scipione and Ms. Ford,
each a non-Independent Trustee, and each of the officers of the Fund are
interested persons of the Adviser are compensated by the Adviser and receive no
compensation from the Fund for their services.
Aggregate Total Compensation From
Compensation the Fund and John Hancock Fund
Independent Trustees From the Fund(1) Complex to Trustees(2)
-------------------- ---------------- ------------------------------
Dennis S. Aronowitz $ 0 $75,250
Richard P. Chapman, Jr+ 0 75,250
William J. Cosgrove+ 0 72,250
Douglas M. Costle * 0 56,000
Leland O. Erdahl 0 72,350
Richard A. Farrell 0 75,250
Gail D. Fosler 0 72,250
William F. Glavin+ 0 68,100
Dr. John A. Moore+ 0 72,350
Patti McGill Peterson 0 75,350
John W. Pratt 0 72,250
- --------
Total $ 0 $786,650
(1) Compensation is for the fiscal year ended December 31, 1999.
(2) Total compensation paid by the John Hancock Funds Complex to the Independent
Trustees is as of December 31, 1999. As of this date, there were sixty-five
funds in the John Hancock Fund Complex of which each of these Independent
Trustees serving thirty-one funds.
(+) As of December 31, 1999, the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock Funds Complex for Mr.
Chapman was $112,162, Mr. Cosgrove was $224,553, Mr. Glavin was $342,213 and for
Dr. Moore was $283,877 under the John Hancock Group of Funds Deferred
Compensation Plan for Independent Trustees.
* Effective December 31, 1999, Mr. Costle retired as Trustee of the Complex.
All of the officers listed are officers or employees of the Adviser or
affiliated companies. Some of the Trustees and officers may also be officers
and/or directors and/or Trustees of one or more of the other funds for which the
Adviser serves as investment adviser.
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and more than $30 billion in assets under management in
its capacity as investment adviser to the Fund and other funds in the John
Hancock group of funds as well as retail and institutional privately managed
accounts. The Adviser is an affiliate of the Life Company, one of the most
recognized and respected financial institutions in the nation. With total assets
under management of more than $100 billion, the Life Company is one of the ten
largest life insurance companies in the United States, and carries a high rating
from Standard & Poor's and A. M. Best. Founded in 1862, the Life Company has
been serving clients for over 130 years.
24
<PAGE>
The Sub-Adviser, AFA, 1415 Kellum Place, Garden City, New York 11530, was
incorporated under the laws of New York in 1978. The Sub-Adviser, subject to the
supervision of the Adviser, manages the Fund's investments.
The Sub-Adviser, Mercury, 800 Scudders Mill Road, Plainsboro, New Jersey 08536,
is a Delaware limited partnership, orignally organized as a corporation in 1977.
The Fund has entered into an investment management contract with the Adviser
(the "Advisory Agreement"). Pursuant to the Advisory Agreement, the Adviser, in
conjunction with the Sub-Adviser will: (a) furnish continuously an investment
program for the Fund and determine, subject to the overall supervision and
review of the Trustees, which investments should be purchased, held, sold or
exchanged and (b) provide supervision over all aspects of the Fund's operations
except those which are delegated to a custodian, transfer agent or other agent.
The Adviser has entered into Sub-Advisory Agreements with the Sub-Advisers under
which they are subject to the review of the Trustees and the overall supervision
of the Adviser are responsible for managing the investment operations of the
Fund and the composition of the Fund's portfolio and furnishing the Fund with
advice and recommendations with respect to investments, investment policies and
the purchase and sale of securities.
The Fund bears all costs of its organization and operation, including but not
limited to expenses of preparing, printing and mailing all shareholders'
reports, notices, prospectuses, proxy statements and reports to regulatory
agencies; expenses relating to the issuance, registration and qualification of
shares; government fees; interest charges; expenses of furnishing to
shareholders their account statements; taxes; expenses of redeeming shares;
brokerage and other expenses connected with the execution of portfolio
securities transactions; expenses pursuant to the Fund's plan of distribution;
fees and expenses of custodians including those for keeping books and accounts
maintaining a committed line of credit and calculating the net asset value of
shares; fees and expenses of transfer agents and dividend disbursing agents;
legal, accounting, financial, management, tax and auditing fees and expenses of
the Fund (including an allocable portion of the cost of the Adviser's employees
rendering such services to the Fund; the compensation and expenses of Trustees
who are not otherwise affiliated with the Trust, the Adviser or any of their
affiliates; expenses of Trustees' and shareholders' meetings; trade association
memberships; insurance premiums; and any extraordinary expenses.
As compensation for its services under the Advisory Agreement, the Fund pays the
Adviser a fee monthly based on a an annual rate of 1.00% of the average of the
daily net assets of the Fund.
From time to time, the Adviser may reduce its fee or make other arrangements to
limit the Fund's expenses to a specified percentage of average daily net assets.
The Adviser retains the right to reimpose a fee and recover any other payments
to the extent that, at the end of any fiscal year, the Fund's annual expenses
fall below this limit.
Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser, the Sub-Advisers or their respective
affiliates provide investment advice. Because of different investment objectives
or other factors, a particular security may be bought for one or more funds or
clients when one or more are selling the same security. If opportunities for
purchase or sale of securities by the Adviser or Sub-Advisers for the Fund or
for other funds or clients for which the Adviser or Sub-Advisers renders
25
<PAGE>
investment advice arise for consideration at or about the same time,
transactions in such securities will be made, insofar as feasible, for the
respective funds or clients in a manner deemed equitable to all of them. To the
extent that transactions on behalf of more than one client of the Adviser, the
Sub-Adviser or their respective affiliates may increase the demand for
securities being purchased or the supply of securities being sold, there may be
an adverse effect on price.
Pursuant to the Advisory Agreement and Sub-Advisory Agreements, the Adviser and
Sub-Advisers are not liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the matters to which their
respective Agreements relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Adviser or Sub-Advisers in the
performance of their duties or from their reckless disregard of the obligations
and duties under the applicable Agreements.
Under the Advisory Agreement, the Fund may use the name "John Hancock" or any
name derived from or similar to it only for so long as the Advisory Agreement or
any extension, renewal or amendment thereof remains in effect. If the Advisory
Agreement is no longer in effect, the Fund (to the extent that it lawfully can)
will cease to use such name or any other name indicating that it is advised by
or otherwise connected with the Adviser. In addition, the Adviser or the Life
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 Advisory Agreement and Sub-Advisory Agreements discussed below, will
continue in effect from year to year, provided that its continuance is approved
annually both by (i) by the holders of a majority of the outstanding voting
securities of the Trust or by the Trustees, and (ii) by a majority of the
Trustees who are not parties to the Agreement or "interested persons" of any
such parties. Both agreements may be terminated on 60 days written notice by any
party or by a vote of a majority of the outstanding voting securities of the
Fund and will terminate automatically if it is assigned. The Sub-Advisory
Agreements terminate automatically upon the termination of the Advisory
Agreement.
As provided in the Sub-Advisory Agreements, the Adviser (not the Fund) pays AFA
a quarterly subadvisory fee at the annual rate of 0.10%.
As provided in the Sub-Advisory Agreement, the Adviser (not the Fund) pays
Mercury Asset Management US a division of Fund Asset Management, L.P. a
quarterly subadvisory fee at the annual rate of 0.33%.
Effective August 28, 2000, the Adviser voluntarily limited the Fund's total
expenses (excluding 12b-1 fees) to 1.35% for Class A, Class B and Class C
shares.
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.
Personnel of the Adviser, Sub-Advisers, and their affiliates may trade
securities for their personal accounts. The Fund also may hold, or may be buying
or selling, the same securities. To prevent the Fund from being disadvantaged,
the Adviser, Sub-Advisers and their affiliates and the Fund have adopted a code
of ethics which restricts the trading activity of those personnel.
26
<PAGE>
DISTRIBUTION CONTRACTS
The Fund has a Distribution Agreement with John Hancock Funds. Under the
agreement, John Hancock Funds is obligated to use its best efforts to sell
shares of each class of the Fund. Shares of the Fund are also sold by selected
broker-dealers (the "Selling Brokers") which have entered into selling agency
agreements with John Hancock Funds. These Selling Brokers are authorized to
designate other intermediaries to receive purchase and redemption orders on
behalf of the Fund. John Hancock Funds accepts orders for the purchase of the
shares of the Fund which are continually offered at net asset value next
determined, plus any applicable sales charge, if any. In connection with the
sale of Funds shares, John Hancock Funds and Selling Brokers receive
compensation from a sales charge imposed, in the case of Class A and Class C
shares, at the time of sale. In the case of Class B or Class C shares, the
broker receives compensation immediately but John Hancock Funds is compensated
on a deferred basis.
The Fund's Trustees adopted Distribution Plans with respect to each class of
shares (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of
1940. Under the Plans, the Fund will pay distribution and service fees at an
aggregate annual rate of up to 0.30% for Class A shares and 1.00% for Class B
and Class C shares of the Fund's average daily net assets attributable to shares
of that class. However, the service fees will not exceed 0.25% of the Fund's
average daily net assets attributable to each class of shares. The distribution
fees will be used to reimburse John Hancock Funds for its distribution expenses,
including but not limited to: (i) initial and ongoing sales compensation to
Selling Brokers and others (including affiliates of John Hancock Funds) engaged
in the sale of Fund shares; (ii) marketing, promotional and overhead expenses
incurred in connection with the distribution of Fund shares; and (iii) with
respect to Class B and Class C shares only, interest expenses on unreimbursed
distribution expenses. The service fees will be used to compensate Selling
Brokers and others for providing personal and account maintenance services to
shareholders. In the event that John Hancock Funds is not fully reimbursed for
payments or expenses it incurs under the Class A Plan, these expenses will not
be carried beyond twelve months from the date they were incurred. Unreimbursed
expenses under the Class B and Class C Plans will be carried forward together
with interest on the balance of these unreimbursed expenses. The Fund does not
treat unreimbursed expenses under the Class B and Class C Plans as a liability
of the Fund because the Trustees may terminate the Class B and /or Class C Plans
at any time with no additional liability for these expenses to the shareholders
of the Fund.
The Plans and all amendments were approved by the Trustees, including a majority
of the Trustees who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plans (the
"Independent Trustees"), by votes cast in person at meetings called for the
purpose of voting on these Plans.
Pursuant to the Plans, at least quarterly, John Hancock Funds provides the Fund
with a written report of the amounts expended under the Plan and the purpose for
which these expenditures were made. The Trustees review these reports on a
quarterly basis to determine their continued appropriateness.
The Plans provide that they will continue in effect only so long as their
continuance is approved at least annually by a majority of both the Trustees and
the Independent Trustees. The Plans provide that they may be terminated without
penalty (a) by a vote of a majority of the Independent Trustees, (b) by a vote
of a majority of the Fund's outstanding shares of the applicable class in each
case upon 60 days' written notice to John Hancock Funds, and (c) automatically
in the event of assignment. The Plans further provide that they may not be
amended to increase the maximum amount of the fees for the services described
27
<PAGE>
therein without the approval of a majority of the outstanding shares of the
class of the Fund which has voting rights with respect to the Plan. Each Plan
provides that no material amendment to the Plan will be effective unless it is
approved by a majority vote of the Trustees and the Independent Trustees of the
Fund. The holders of Class A, Class B and Class C shares have exclusive voting
rights with respect to the Plan applicable to their respective class of shares.
In adopting the Plans, the Trustees concluded that, in their judgment, there is
a reasonable likelihood that the Plans will benefit the holders of the
applicable class of shares of the Fund.
Amounts paid to the John Hancock Funds by any class of shares of the Fund will
not be used to pay the expenses incurred with respect to any other class of
shares of the Fund; provided, however, that expenses attributable to the Fund as
a whole will be allocated, to the extent permitted by law, according to the
formula based upon gross sales dollars and/or average daily net assets of each
such class, as may be approved from time to time by vote of a majority of the
Trustees. From time to time, the Fund may participate in joint distribution
activities with other Funds and the costs of those activities will be borne by
each Fund in proportion to the relative net asset value of the participating
Fund.
SALES COMPENSATION
As part of their business strategies, the Fund, along with John Hancock Funds,
pays compensation to financial services firms that sell the Fund's shares. These
firms typically pass along a portion of this compensation to your financial
representative.
The two primary sources of compensation payments are (1) 12b-1 fees that are
paid out of the Fund's assets and (2) sales charges paid by investors. The sales
charges and 12b-1 fees are detailed in the prospectus and under "Distribution
Contracts" in this Statement of Additional Information. The portions of these
expenses that are reallowed to financial services firms are shown on the next
page.
Whenever you make an investment in the Fund, the financial services firm
receives a reallowance, as described below. The firm also receives the first
year's service fee at this time. Beginning with the second year after an
investment is made, the financial services firm receives an annual service fee
of 0.25% of its total eligible fund net assets. This fee is paid quarterly in
arrears by the Fund.
In addition, from time to time, John Hancock Funds, at its expense, may provide
significant additional compensation to financial services firms which sell or
arrange for the sale of shares of the Fund. Such compensation provided by John
Hancock Funds may include, for example, financial assistance to financial
services firms in connection with their conferences or seminars, sales or
training programs for invited registered representatives and other employees,
payment for travel expenses, including lodging, incurred by registered
representatives and other employees for such seminars or training programs,
seminars for the public, advertising and sales campaigns regarding one or more
Funds, and/or other financial services firms-sponsored events or activities.
From time to time, John Hancock Funds may make expense reimbursements for
special training of a financial services firm's registered representatives and
other employees in group meetings or to help pay the expenses of sales contests.
Other compensation, such as asset retention fees, finder's fees and
reimbursement for wire transfer fees, may be offered to the extent not
prohibited by law or any self-regulatory agency, such as the NASD.
28
<PAGE>
<TABLE>
<CAPTION>
First year
Sales charge Maximum Service fee Maximum
paid by investors Reallowance (% of net total compensation (1)
Class A investments (% of offering price) (% of offering price) investment) (3) (% of offering price)
------------------- --------------------- --------------------- --------------- ---------------------
<S> <C> <C> <C> <C>
Up to $49,999 5.00% 4.01% 0.25% 4.25%
$50,000 - $99,999 4.50% 3.51% 0.25% 3.75%
$100,000 - $249,999 3.50% 2.61% 0.25% 2.85%
$250,000 - $499,999 2.50% 1.86% 0.25% 2.10%
$500,000 - $999,999 2.00% 1.36% 0.25% 1.60%
Regular investments of
Class A shares of
$1 million or more (4)
----------------------
First $1M - $4,999,999 -- 0.75% 0.25% 1.00%
Next $1 - $5M above that -- 0.25% 0.25% 0.50% (2)
Next $1 or more above that -- 0.00% 0.25% 0.25% (2)
Retirement investments of
Class A shares of
$1 million or more*
-------------------
First $1M - $24,999,999 -- 0.75% 0.25% 1.00%
Next $25M -$49,999,999 -- 0.25% 0.25% 0.50%
Next $1 or more above that -- 0.00% 0.25% 0.25%
First year
Maximum Service fee Maximum total
Reallowance (% of net compensation (1)
Class B investments (% of offering price) investment) (3) (% of offering price)
------------------- --------------------- --------------- ---------------------
All amounts -- 3.75% 0.25% 4.00%
First year
Maximum Service fee Maximum total
Reallowance (% of net compensation (1)
Class C investments (% of offering price) investment) (3) (% of offering price)
------------------- --------------------- --------------- ---------------------
Amounts purchased
at NAV -- 0.75% 0.25% 1.00%
All other amounts 1.00% 1.75% 0.25% 2.00%
</TABLE>
(1) Reallowance percentages and service fee percentages are calculated from
different amounts, and therefore may not equal total compensation
percentages if combined using simple addition.
(2) For Group Investment Programs sales, the maximum total compensation for
investments of $1 million or more is 1.00% of the offering price (one year
CDSC of 1.00% applies for each sale).
29
<PAGE>
(3) After first year subsequent service fees are paid quarterly in arrears.
(4) Includes new investments aggregated with investments since the last annual
reset. John Hancock Funds may take recent redemptions into account in
determining if an investment qualifies as a new investment.
CDSC revenues collected by John Hancock Funds may be used to pay commissions
when there is no initial sales charge.
*Retirement investments only. These include traditional, Roth and Education
IRAs, SIMPLE IRAs, SIMPLE 401(k), Rollover IRA, TSA, 457, 403(b), 401(k), Money
Purchase Pension Plan, profit-sharing plan and other retirement plans as
described in the Internal Revenue Code.
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the Fund's shares,
the following procedures are utilized wherever applicable.
Debt investment securities are valued on the basis of valuations furnished by a
principal market maker or a pricing service, both of which generally utilize
electronic data processing techniques to determine valuations for normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices.
Equity securities traded on a principal exchange or NASDAQ National Market
Issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned category for which no sales are reported and
other securities traded over-the-counter are generally valued at the last
available bid price.
Short-term debt investments which have a remaining maturity of 60 days or less
are generally valued at amortized cost which approximates market value. If
market quotations are not readily available or if in the opinion of the Adviser
any quotation or price is not representative of true market value, the fair
value of the security may be determined in good faith in accordance with
procedures approved by the Trustees.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded. Any assets or liabilities expressed in terms of
foreign currencies are translated into U.S. dollars by the custodian bank based
on London currency exchange quotations as of 5:00 p.m., London time (12:00 noon,
New York time) on the date of any determination of the Fund's NAV. If quotations
are not readily available, or the value has been materially affected by the
events occurring after the closing of a foreign market, assets are valued by a
method that the Trustees believe accurately reflects fair value.
The NAV of each Fund and class is determined each business day at the close of
regular trading on the New York Stock Exchange (typically 4:00 p.m. Eastern
Time) by dividing the a class's net assets by the number of it shares
outstanding. On any day an international market is closed and the New York Stock
Exchange is open, any foreign securities will be valued at the prior day's close
with the current day's exchange rate. Trading of foreign securities may take
place on Saturdays and U.S. business holidays on which the Fund's NAV is not
calculated. Consequently, the Fund's portfolio securities may trade and the NAV
of the Fund's redeemable securities may be significantly affected on days when a
shareholder has no access to the Fund.
30
<PAGE>
INITIAL SALES CHARGE ON CLASS A AND CLASS C SHARES
Shares of the Fund are offered at a price equal to their net asset value plus a
sales charge which, at the option of the purchaser, may be imposed either at the
time of purchase (the "initial sales charge alternative") or on a contingent
deferred basis (the "deferred sales charge alternative"). Share certificates
will not be issued unless requested by the shareholder in writing, and then only
be issued for full shares. The Trustees reserve the right to change or waive a
Fund's minimum investment requirements and to reject any order to purchase
shares (including purchase by exchange) when in the judgment of the Adviser such
rejection is in the Fund's best interest.
The sales charges applicable to purchases of Class A and Class C shares of the
Fund are described in the Prospectus. Methods of obtaining reduced sales charges
referred to generally in the Prospectus are described in detail below. In
calculating the sales charge applicable to current purchases of Class A shares
of the Fund, the investor is entitled to cumulate current purchases with the
greater of the current value (at offering price) of the Class A shares of the
Fund, or if John Hancock Signature Services, Inc. ("Signature Services") is
notified by the investor's dealer or the investor at the time of the purchase,
the cost of the Class A shares owned.
Without Sales Charge. Class A shares may be offered without a front-end sales
charge or contingent deferred sales charges ("CDSC") to various individuals and
institutions as follows:
o A Trustee or officer of the Trust; a Director or officer of the Adviser
and its affiliates or Selling Brokers; employees or sales
representatives of any of the foregoing; retired officers, employees or
Directors of any of the foregoing; a member of the immediate family
(spouse, children, grandparents, grandchildren, mother, father, sister,
brother, mother-in-law, father-in-law, daughter-in-law, son-in-law,
niece, nephew and same sex domestic partner) of any of the foregoing;
or any fund, pension, profit sharing or other benefit plan for the
individuals described above.
o A broker, dealer, financial planner, consultant or registered
investment advisor that has entered into a signed agreement with John
Hancock Funds providing specifically for the use of fund shares in
fee-based investment products or services made available to their
clients.
o A former participant in an employee benefit plan with John Hancock
funds, when he or she withdraws from his or her plan and transfers any
or all of his or her plan distributions directly to the Fund.
o A member of a class action lawsuit against insurance companies who is
investing settlement proceeds.
o Retirement plans participating in Merrill Lynch servicing programs,
if the Plan has more than $3 million in assets or 500 eligible
employees at the date the Plan Sponsor signs the Merrill Lynch
Recordkeeping Service Agreement. See your Merrill Lynch financial
consultant for further information.
o Retirement plans investing through the PruArray Program sponsored by
Prudential Securities.
31
<PAGE>
o Pension plans transferring assets from a John Hancock variable annuity
contract to the Fund pursuant to an exemptive application approved by
the Securities and Exchange Commission.
o Existing full service clients of the Life Company who were group
annuity contract holders as of September 1, 1994, and participant
directed retirement plans with at least 100 eligible employees at the
inception of the Fund account. Each of these investors may purchase
Class A shares with no initial sales charge. However, for each Fund, if
the shares are redeemed within 12 months after the end of the calendar
year in which the purchase was made, a CDSC will be imposed at the
following rate:
Amount Invested CDSC RATE
--------------- ---------
$1 to $4,999,000 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
Class C shares may be offered without a front-end sales charge to:
o Retirement plans for which John Hancock Signature Services
performs employer sponsored plan recordkeeping services. (These
types of plans include 401(k), money purchase pension, profit
sharing and SIMPLE 401k.)
o An investor who buys through a Merrill Lynch omnibus account.
However, a CDSC may apply if the shares are sold within 12 months
of purchase.
Class A and Class C shares may also be purchased without an initial sales charge
in connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.
Combination Privilege. In calculating the sales charge applicable to purchases
of Class A shares made at one time, the purchases will be combined to reduce
sales charges if made by (a) an individual, his or her spouse and their children
under the age of 21, purchasing securities for his or their own account, (b) a
trustee or other fiduciary purchasing for a single trust, estate or fiduciary
account and (c) groups which qualify for the Group Investment Program (see
below). A company's (not an individual's) qualified and non-qualified retirement
plan investments can be combined to take advantage of this privilege. Further
information about combined purchases, including certain restrictions on combined
group purchases, is available from Signature Services or a Selling Broker's
representative.
Accumulation Privilege. Investors (including investors combining purchases) who
are already Class A shareholders may also obtain the benefit of the reduced
sales charge by taking into account not only the amount being invested but also
the investor's purchase price or current value of the Class A shares of all John
Hancock funds which carry a sales charge already held by such person. Class A
shares of John Hancock money market funds will only be eligible for the
accumulation privilege if the investor has previously paid a sales charge on the
amount of those shares. Retirement plan investors may include the value of Class
B shares if Class B shares held are greater than $1 million. Retirement plans
must notify Signature Services to utilize. A company's (not an individual's)
qualified and non-qualified retirement plan investments can be combined to take
advantage of this privilege.
32
<PAGE>
Group Investment Program. Under the Combination and Accumulation Privileges, all
members of a group may combine their individual purchases of Class A shares to
potentially qualify for breakpoints in the sales charge schedule. This feature
is provided to any group which (1) has been in existence for more than six
months, (2) has a legitimate purpose other than the purchase of mutual fund
shares at a discount for its members, (3) utilizes salary deduction or similar
group methods of payment, and (4) agrees to allow sales materials of the fund in
its mailings to members at a reduced or no cost to John Hancock Funds.
Letter of Intention. Reduced sales charges are also applicable to investments
made pursuant to a Letter of Intention (the "LOI"), which should be read
carefully prior to its execution by an investor. The Fund offers two options
regarding the specified period for making investments under the LOI. All
investors have the option of making their investments over a specified period of
thirteen (13) months. Investors who are using the Fund as a funding medium for a
retirement plan, however, may opt to make the necessary investments called for
by the LOI over a forty-eight (48) month period. These retirement plans include
traditional, Roth and Education IRAs, SEP, SARSEP, 401(k), 403(b) (including
TSAs), SIMPLE IRA, SIMPLE (401(k), Money purchase pension, Profit Sharing and
Section 457 plans. An individual's non-qualified and qualified retirement plan
investments cannot be combined to satisfy an LOI of 48 months. Such an
investment (including accumulations and combinations but not including
reinvested dividends) must aggregate $50,000 or more during the specified period
from the date of the LOI or from a date within ninety (90) days prior thereto,
upon written request to Signature Services. The sales charge applicable to all
amounts invested under the LOI is computed as if the aggregate amount intended
to be invested had been invested immediately. If such aggregate amount is not
actually invested, the difference in the sales charge actually paid and the
sales charge payable had the LOI not been in effect is due from the investor.
However, for the purchases actually made within the specified period (either 13
or 48 months) the sales charge applicable will not be higher than that which
would have applied (including accumulations and combinations) had the LOI been
for the amount actually invested.
The LOI authorizes Signature Services to hold in escrow sufficient Class A
shares (approximately 5% of the aggregate) to make up any difference in sales
charges on the amount intended to be invested and the amount actually invested,
until such investment is completed within the specified period, at which time
the escrow shares will be released. If the total investment specified in the LOI
is not completed, the Class A shares held in escrow may be redeemed and the
proceeds used as required to pay such sales charge as may be due. By signing the
LOI, the investor authorizes Signature Services to act as his attorney-in-fact
to redeem any escrowed Class A shares and adjust the sales charge, if necessary.
A LOI does not constitute a binding commitment by an investor to purchase, or by
the Fund to sell, any additional Class A shares and may be terminated at any
time.
DEFERRED SALES CHARGE ON CLASS B AND CLASS C SHARES
Investments in Class B shares are purchased at net asset value per share without
the imposition of an initial sales charge so the Fund will receive the full
amount of the purchase payment.
Contingent Deferred Sales Charge. Class B and Class C shares which are redeemed
within six years or one year of purchase, respectively will be subject to a CDSC
at the rates set forth in the Prospectus as a percentage of the dollar amount
subject to the CDSC. The charge will be assessed on an amount equal to the
lesser of the current market value or the original purchase cost of the Class B
or Class C shares being redeemed. No CDSC will be imposed on increases in
account value above the initial purchase price or on shares derived from
reinvestment of dividends or capital gains distributions.
33
<PAGE>
Class B shares are not available to full-service retirement plans administered
by Signature Services or the Life Company that had more than 100 eligible
employees at the inception of the Fund account.
The amount of the CDSC, if any, will vary depending on the number of years from
the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchase of both Class B and Class C
shares, all payments during a month will be aggregated and deemed to have been
made on the first day of the month.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period for Class B or one year CDSC
redemption period for Class C or those you acquired through dividend and capital
gain reinvestment, and next from the shares you have held the longest during the
six-year period for Class B shares. For this purpose, the amount of any increase
in a share's value above its initial purchase price is not subject to a CDSC.
Thus, when a share that has appreciated in value is redeemed during the CDSC
period, a CDSC is assessed only on its initial purchase price.
When requesting a redemption for a specific dollar amount please indicate if you
require the proceeds to equal the dollar amount requested. If not indicated,
only the specified dollar amount will be redeemed from your account and the
proceeds will be less any applicable CDSC.
Example:
You have purchased 100 Class B shares at $10 per share. The second year after
your purchase, your investment's net asset value per share has increased by $2
to $12, and you have gained 10 additional shares through dividend reinvestment.
If you redeem 50 shares at this time your CDSC will be calculated as follows:
oProceeds of 50 shares redeemed at $12 per shares (50 x 12) $600.00
o*Minus Appreciation ($12 - $10) x 100 shares (200.00)
o Minus proceeds of 10 shares not subject to
CDSC (dividend reinvestment) (120.00)
-------
oAmount subject to CDSC $280.00
*The appreciation is based on all 100 shares in the account not just
the shares being redeemed.
Proceeds from the CDSC are paid to John Hancock Funds and are used in whole or
in part by John Hancock Funds to defray its expenses related to providing
distribution-related services to the Fund in connection with the sale of the
Class B and Class C shares, such as the payment of compensation to select
Selling Brokers for selling Class B and Class C shares. The combination of the
CDSC and the distribution and service fees facilitates the ability of the Fund
to sell the Class B and Class C shares without a sales charge being deducted at
the time of the purchase.
34
<PAGE>
Waiver of Contingent Deferred Sales Charge. The CDSC will be waived on
redemptions of Class B and Class C shares and of Class A shares that are subject
to a CDSC, unless indicated otherwise, in the circumstances defined below:
For all account types:
* Redemptions made pursuant to the Fund's right to liquidate your account
if you own shares worth less than $1,000.
* Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
* Redemptions due to death or disability. (Does not apply to trust
accounts unless trust is being dissolved.)
* Redemptions made under the Reinstatement Privilege, as described in
"Sales Charge Reductions and Waivers" of the Prospectus.
* Redemptions of Class B (but not Class C) shares made under a periodic
withdrawal plan or redemptions for fees charged by planners or advisors
for advisory services, as long as your annual redemptions do not exceed
12% of your account value, including reinvested dividends, at the time
you established your periodic withdrawal plan and 12% of the value of
subsequent investments (less redemptions) in that account at the time
you notify Signature Services. (Please note that this waiver does not
apply to periodic withdrawal plan redemptions of Class A or Class C
shares that are subject to a CDSC).
* Redemptions by Retirement plans participating in Merrill Lynch
servicing programs, if the Plan has less than $3 million in assets or
500 eligible employees at the date the Plan Sponsor signs the Merrill
Lynch Recordkeeping Service Agreement. See your Merrill Lynch financial
consultant for further information.
* Redemptions of Class A shares by retirement plans that invested through
the PruArray Program sponsored by Prudential Securities.
* Redemptions of Class A shares made after one year from the inception
date of a retirement plan at John Hancock for which John Hancock is
recordkeeper.
For Retirement Accounts (such as traditional, Roth and Education IRAs, SIMPLE
IRAs, SIMPLE 401(k), Rollover IRA, TSA, 457, 403(b), 401(k), Money Purchase
Pension Plan, Profit-Sharing Plan and other plans as described in the Internal
Revenue Code) unless otherwise noted.
* Redemptions made to effect mandatory or life expectancy distributions
under the Internal Revenue Code.
* Returns of excess contributions made to these plans.
* Redemptions made to effect distributions to participants or
beneficiaries from employer sponsored retirement plans under sections
401(a) (such as Money Purchase Pension Plans and Profit-Sharing/401(k)
Plans), 457 and 408 (SEPs and SIMPLE IRAs) of the Internal Revenue
Code.
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<PAGE>
* Redemptions from certain IRA and retirement plans that purchased shares
prior to October 1, 1992 and certain IRA accounts that purchased shares
prior to May 15, 1995.
Please see matrix for some examples.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Type of 401 (a) Plan 403 (b) 457 IRA, IRA Non-retirement
Distribution (401 (k), MPP, Rollover
PSP) 457 & 408
(SEPs & Simple
IRAs)
----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Death or Disability Waived Waived Waived Waived Waived
----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Over 70 1/2 Waived Waived Waived Waived for 12% of account
mandatory value annually
distributions in periodic
or 12% of payments
account value
annually in
periodic
payments.
----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Between 59 1/2 Waived Waived Waived Waived for Life 12% of account
and 70 1/2 Expectancy or value annually
12% of account in periodic
value annually payments
in periodic
payments.
----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Under 59 1/2 Waived for Waived for Waived for Waived for 12% of account
(Class B only) annuity annuity annuity annuity value annually
payments (72t) payments (72t) payments (72t) payments (72t) in periodic
or 12% of or 12% of or 12% of or 12% of payments
account value account value account value account value
annually in annually in annually in annually in
periodic periodic periodic periodic
payments. payments. payments. payments.
----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Loans Waived Waived N/A N/A N/A
----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Termination of Plan Not Waived Not Waived Not Waived Not Waived N/A
----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Hardships Waived Waived Waived N/A N/A
----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Qualified Domestic Waived Waived Waived N/A N/A
Relations Orders
----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Termination of Waived Waived Waived N/A N/A
Employment Before
Normal Retirement Age
----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Return of Excess Waived Waived Waived Waived N/A
----------------------- ----------------- ----------------- ---------------- ----------------- ----------------
</TABLE>
36
<PAGE>
If you qualify for a CDSC waiver under one of these situations, you must notify
Signature Services at the time you make your redemption. The waiver will be
granted once Signature Services has confirmed that you are entitled to the
waiver.
SPECIAL REDEMPTIONS
Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When the shareholder sells portfolio
securities received in this fashion, the shareholder will incur a brokerage
charge. Any such securities would be valued for the purposes of making such
payment at the same value as used in determining net asset value. The Fund has
elected to be governed by Rule 18f-1 under the Investment Company Act. Under
that rule, the Fund must redeem its shares for cash except to the extent that
the redemption payments to any shareholder during any 90-day period would exceed
the lesser of $250,000 or 1% of the Fund's net asset value at the beginning of
such period.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. The Fund permits exchanges of shares of any class of a Fund
for shares of the same class in any other John Hancock fund offering that class.
Exchanges between funds with shares that are not subject to a CDSC are based on
their respective net asset values. No sales charge or transaction charge is
imposed. Shares of the Fund which are subject to a CDSC may be exchanged into
shares of any of the other John Hancock funds that are subject to a CDSC without
incurring the CDSC; however, the shares acquired in an exchange will be subject
to the CDSC schedule of the shares acquired if and when such shares are redeemed
(except that shares exchanged into John Hancock 500 Index Fund and John Hancock
Intermediate Government Fund will retain the exchanged fund's CDSC schedule).
For purposes of computing the CDSC payable upon redemption of shares acquired in
an exchange, the holding period of the original shares is added to the holding
period of the shares acquired in an exchange.
If a shareholder exchanges Class B shares purchased prior to January 1, 1994 for
Class B shares of any other John Hancock fund, the acquired shares will continue
to be subject to the CDSC schedule that was in effect when the exchanged shares
were purchased.
The Fund reserves the right to require that previously exchanged shares (and
reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange.
The Fund may refuse any exchange order. The Fund may change or cancel its
exchange policies at any time, upon 60 days' notice to its shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal Income Tax purposes. An exchange may
result in a taxable gain or loss. See "TAX STATUS".
Systematic Withdrawal Plan. The Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds arising from the
redemption of the Fund shares. Since the redemption price of the Fund shares may
be more or less than the shareholder's cost, depending upon the market value of
the securities owned by the Fund at the time of redemption, the distribution of
cash pursuant to this plan may result in realization of gain or loss for
purposes of Federal, state and local income taxes. The maintenance of a
Systematic Withdrawal Plan concurrently with purchases of additional shares of
37
<PAGE>
the Fund could be disadvantageous to a shareholder because of the initial sales
charge payable on such purchases of Class A shares and the CDSC imposed on
redemptions of Class B and Class C shares and because redemptions are taxable
events. Therefore, a shareholder should not purchase shares at the same time
that a Systematic Withdrawal Plan is in effect. The Fund reserves the right to
modify or discontinue the Systematic Withdrawal Plan of any shareholder on 30
days' prior written notice to such shareholder, or to discontinue the
availability of such plan in the future. The shareholder may terminate the plan
at any time by giving proper notice to Signature Services.
Monthly Automatic Accumulation Program ("MAAP"). The program is explained in the
Prospectus. The program, as it relates to automatic investment checks, is
subject to the following conditions:
The investments will be drawn on or about the day of the month indicated.
The privilege of making investments through the MAAP may be revoked by Signature
Services without prior notice if any investment is not honored by the
shareholder's bank. The bank shall be under no obligation to notify the
shareholder as to the nonpayment of any checks.
The program may be discontinued by the shareholder either by calling Signature
Services or upon written notice to Signature Services which is received at least
five (5) business days prior to the due date of any investment.
Reinstatement or Reinvestment Privilege. If Signature Services is notified prior
to reinvestment, a shareholder who has redeemed Fund shares may, within 120 days
after the date of redemption, reinvest without payment of a sales charge any
part of the redemption proceeds in shares of the same class of the Fund or
another John Hancock fund, subject to the minimum investment limit of that fund.
The proceeds from the redemption of Class A shares may be reinvested at net
asset value without paying a sales charge in Class A shares of the Fund or in
Class A shares of any John Hancock fund. If a CDSC was paid upon a redemption, a
shareholder may reinvest the proceeds from this redemption at net asset value in
additional shares of the class from which the redemption was made. The
shareholder's account will be credited with the amount of any CDSC charged upon
the prior redemption and the new shares will continue to be subject to the CDSC.
The holding period of the shares acquired through reinvestment will, for
purposes of computing the CDSC payable upon a subsequent redemption, include the
holding period of the redeemed shares.
To protect the interests of other investors in the Fund, the Fund may cancel the
reinvestment privilege of any parties that, in the opinion of the Fund, are
using market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. Also, the Fund may refuse any reinvestment
request.
The Fund may change or cancel its reinvestment policies at any time.
A redemption or exchange of Fund shares is a taxable transaction for Federal
income tax purposes even if the reinvestment privilege is exercised, and any
gain or loss realized by a shareholder on the redemption or other disposition of
Fund shares will be treated for tax purposes as described under the caption "TAX
STATUS."
38
<PAGE>
Retirement plans participating in Merrill Lynch's servicing programs:
Class A shares are available at net asset value for plans with $3 million in
plan assets or 500 eligible employees at the date the Plan Sponsor signs the
Merrill Lynch Recordkeeping Service Agreement. If the plan does not meet either
of these limits, Class A shares are not available.
For participating retirement plans investing in Class B shares, shares will
convert to Class A shares after eight years, or sooner if the plan attains
assets of $5 million (by means of a CDSC-free redemption/purchase at net asset
value).
PURCHASES AND REDEMPTIONS THROUGH THIRD PARTIES
Shares of the Fund may be purchased or redeemed through certain broker-dealers.
Brokers may charge for their services or place limitations on the extent to
which you may use the services of the Fund. The Fund will be deemed to have
received a purchase or redemption order when an authorized broker, or if
applicable, a broker's authorized designee, receives the order. If a broker is
an agent or designee of the Fund, orders are processed at the NAV next
calculated after the broker receives the order. The broker must segregate any
orders it receives after the close of regular trading on the New York Stock
Exchange and transmit those orders to the Fund for execution at NAV next
determined. Some brokers that maintain nominee accounts with the Fund for their
clients charge an annual fee on the average net assets held in such accounts for
accounting, servicing, and distribution services they provide with respect to
the underlying Fund shares. The Adviser, the Fund, and John Hancock Funds, Inc.
(the Fund's principal distributor), share in the expense of these fees.
DESCRIPTION OF THE FUND'S SHARES
The Trustees of the Trust are responsible for the management and supervision of
the Fund. The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of the Fund without
par value. Under the Declaration of Trust, the Trustees have the authority to
create and classify shares of beneficial interest in separate series and classes
without further action by shareholders. As of the date of this Statement of
Additional Information, the Trustees have authorized shares of the Fund.
Additional series may be added in the future. The Trustees have also authorized
the issuance of three classes of shares of the Fund, designated as Class A,
Class B and Class C.
The shares of each class of the Fund represent an equal proportionate interest
in the aggregate net assets attributable to that class of the Fund. Holders of
each Class of shares have certain exclusive voting rights on matters relating to
their respective distribution plans. The different classes of the Fund may bear
different expenses relating to the cost of holding shareholder meetings
necessitated by the exclusive voting rights of any class of shares.
Dividends paid by the Fund, if any, with respect to each class of shares will be
calculated in the same manner, at the same time and on the same day and will be
in the same amount, except for differences resulting from the facts that (i) the
distribution and service fees relating to each class will be borne exclusively
by that class, (ii) Class B and Class C shares will pay higher distribution and
service fees than Class A shares and (iii) each class of shares will bear any
class expenses properly allocable to that class of shares, subject to the
conditions the Internal Revenue Service imposes with respect to the
multiple-class structures. Similarly, the net asset value per share may vary
depending on which class of shares are purchased. No interest will be paid on
uncashed dividend or redemption checks.
39
<PAGE>
In the event of liquidation, shareholders of each class are entitled to share
pro rata in the net assets of the Fund available for distribution to these
shareholders. Shares entitle their holders to one vote per share, are freely
transferable and have no preemptive, subscription or conversion rights. When
issued, shares are fully paid and non-assessable, except as set forth below.
Unless otherwise required by the Investment Company Act or the Declaration of
Trust, the Fund has no intention of holding annual meetings of shareholders.
Fund shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Trust's outstanding shares and the Trustees shall promptly
call a meeting for such purpose when requested to do so in writing by the record
holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the Trust. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts, obligations or affairs of the Fund. The
Declaration of Trust also provides for indemnification out of the Fund's assets
for all losses and expenses of any shareholder held personally liable by reason
of being or having been a shareholder. The Declaration of Trust also provides
that no series of the Trust shall be liable for the liabilities of any other
series. Furthermore, no fund included in this Fund's prospectus shall be liable
for the liabilities of any other John Hancock fund. Liability is therefore
limited to circumstances in which the Fund itself would be unable to meet its
obligations, and the possibility of this occurrence is remote.
The Fund reserves the right to reject any application which conflicts with the
Fund's internal policies or the policies of any regulatory authority. John
Hancock Funds does not accept starter, credit card or third party checks. All
checks returned by the post office as undeliverable will be reinvested at net
asset value in the fund or funds from which a redemption was made or dividend
paid. Information provided on the account application may be used by the Fund to
verify the accuracy of the information or for background or financial history
purposes. A joint account will be administered as a joint tenancy with right of
survivorship, unless the joint owners notify Signature Services of a different
intent. A shareholder's account is governed by the laws of The Commonwealth of
Massachusetts. For telephone transactions, the transfer agent will take measures
to verify the identity of the caller, such as asking for name, account number,
Social Security or other taxpayer ID number and other relevant information. If
appropriate measures are taken, the transfer agent is not responsible for any
loss that may occur to any account due to an unauthorized telephone call. Also
for your protection telephone transactions are not permitted on accounts whose
names or addresses have changed within the past 30 days. Proceeds from telephone
transactions can only be mailed to the address of record.
Selling activities for the Fund may not take place outside the U.S. except with
U.S. military bases, APO addresses and U.S. diplomats. Brokers of record on
Non-U.S. investors' accounts with foreign mailing addresses are required to
certify that all sales activities have occurred, and in the future will occur,
only in the U.S. A foreign corporation may purchase shares of the Fund only if
it has a U.S. mailing address.
40
<PAGE>
TAX STATUS
The Fund is treated as a separate entity for accounting and tax purposes, has
qualified and elected to be treated as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and
intends to continue to qualify for each taxable year. As such and by complying
with the applicable provisions of the Code regarding the sources of its income,
the timing of its distributions and the diversification of its assets, the Fund
will not be subject to Federal income tax on its taxable income (including net
realized capital gains) which is distributed to shareholders in accordance with
the timing requirements of the Code.
The Fund will be subject to a 4% nondeductible Federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a timely
basis in accordance with annual minimum distribution requirements. The Fund
intends under normal circumstances to seek to avoid or minimize liability for
this tax by satisfying such distribution requirements.
Distributions from the Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they are paid from the
Fund's "net capital gain," they will be taxable as long-term capital gain. (Net
capital gain is the excess (if any) of net long-term capital gain over net
short-term capital loss, and investment company taxable income is all taxable
income and capital gains, other than those gains and losses included in
computing net capital gain, after reduction by deductible expenses.). Some
distributions may be paid in January but may be taxable to shareholders as if
they had been received on December 31 of the previous year. The tax treatment
described above will apply without regard to whether distributions are received
in cash or reinvested in additional shares of the Fund.
Distributions, if any, in excess of E&P will constitute a return of capital
under the Code, which will first reduce an investor's federal tax basis in Fund
shares and then, to the extent such basis is exceeded, will generally give rise
to capital gains. Shareholders who have chosen automatic reinvestment of their
distributions will have a federal tax basis in each share received pursuant to
such a reinvestment equal to the amount of cash they would have received had
they elected to receive the distribution in cash, divided by the number of
shares received in the reinvestment.
Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
certain foreign currency options, foreign currency forward contracts, foreign
currencies, or payables or receivables denominated in a 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. Transactions in foreign
currencies that are not directly related to the Fund's investment in stock or
securities, including speculative currency positions could under future Treasury
regulations produce income not among the types of "qualifying income" from which
the Fund must derive at least 90% of its gross income for each taxable year. If
the net foreign exchange loss for a year 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.
Certain payments received by the Fund with respect to loan participations, such
as commitment fees or facility fees, may not be treated as qualifying income
under the 90% requirement referred to above if they are not properly treated as
interest under the Code.
41
<PAGE>
If the Fund invests in stock (including an option to acquire stock such as is
inherent in a convertible bond) of certain foreign corporations that receive at
least 75% of their annual gross income from passive sources (such as interest,
dividends, certain rents and royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), the Fund could be subject to Federal income tax and
additional interest charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by the Fund is timely distributed to its shareholders.
The Fund would not be able to pass through to its shareholders any credit or
deduction for such a tax. An election may be available to ameliorate these
adverse tax consequences, but could require the Fund to recognize taxable income
or gain without the concurrent receipt of cash. These investments could also
result in the treatment of associated capital gains as ordinary income. The Fund
may limit and/or manage its holdings in passive foreign investment companies to
minimize its tax liability or maximize its return from these investments.
The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in foreign securities. Some tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. The Fund does not expect to qualify to pass such taxes
through to its shareholders, who consequently will not take such taxes into
account on their own tax returns. However, the Fund will deduct such taxes in
determining the amount it has available for distribution to shareholders.
Limitations imposed by the Code on regulated investment companies like the Fund
may restrict the Fund's ability to enter into options, futures, foreign currency
positions and foreign currency forward contracts.
Certain options, futures and forward foreign currency contracts undertaken by
the Fund may cause the Fund to recognize gains or losses from marking to market
even though its positions have not been sold or terminated and may affect the
character as long-term or short-term (or, in the case of foreign currency
contracts, as ordinary income or loss) and timing of some capital gains and
losses realized by the Fund. Additionally, the Fund may be required to recognize
gain, but not loss, if an option or other transaction is treated as a
constructive sale of an appreciated financial position in the Fund's portfolio.
Also, certain of the Fund's losses on its transactions involving options,
futures or forward contracts, and/or offsetting or successor portfolio positions
may be deferred rather than being taken into account currently in calculating
the Fund's taxable income or gains. These transactions may therefore affect the
amount, timing and character of the Fund's distributions to shareholders.
Certain of such transactions may also cause the Fund to dispose of investments
sooner than would otherwise have occurred. The Fund will take into account the
special tax rules applicable to options or forward contracts, including
consideration of available elections, in order to seek to minimize any potential
adverse tax consequences.
The amount of the Fund's net realized capital gains, if any, in any given year
will vary depending upon the Adviser's current investment strategy and whether
the Adviser believes it to be in the best interest of the Fund to dispose of
portfolio securities and /or engage in options, futures or forward transactions
will generate capital gains. At the time of an investor's purchase of shares of
the Fund, a portion of the purchase price is often attributed to realized or
unrealized appreciation in the Fund's portfolio or undistributed taxable income
of the Fund. Consequently, subsequent distributions from such appreciation or
income may be taxable to such investor even if the net asset value of the
investor's shares is, as a result of the distributions, reduced below the
investor's cost for such shares, and the distributions (or portions thereof) in
reality represent a return of a portion of the purchase price.
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Upon a redemption or other disposition of shares (including by exercise of the
exchange privilege) in a transaction that is treated as a sale for tax purposes,
a shareholder will ordinarily realize a taxable gain or loss depending upon the
amount of the proceeds and the investor's basis in his shares. Such gain or loss
will be treated as capital gain or loss if the shares are capital assets in the
shareholder's hands and will be long-term or short-term, depending upon the
shareholder's tax holding period for the shares and subject to the special rules
described below. A sales charge paid in purchasing shares of the Fund cannot be
taken into account for purposes of determining gain or loss on the redemption or
exchange of such shares within 90 days after their purchase to the extent shares
of the Fund or another John Hancock fund are subsequently acquired without
payment of a sales charge pursuant to the reinvestment or exchange privilege.
This disregarded charge will result in an increase in the shareholder's tax
basis in the shares subsequently acquired. Also, any loss realized on a
redemption or exchange may be disallowed to the extent the shares disposed of
are replaced with other shares of the Fund within a period of 61 days beginning
30 days before and ending 30 days after the shares are disposed of, such as
pursuant to an election to reinvest dividends in additional shares. In such a
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized upon the redemption of shares with a tax
holding period of six months or less will be treated as a long-term capital loss
to the extent of any amounts treated as distributions of long-term capital gain
with respect to such shares. Shareholders should consult their own tax advisers
regarding their particular circumstances to determine whether a disposition of
Fund shares is properly treated as a sale for tax purposes, as is assumed in the
foregoing discussion.
Although its present intention is to distribute, at least annually, all net
capital gain, if any, the Fund reserves the right to retain and reinvest all or
any portion of the excess, as computed for Federal income tax purposes, of net
long-term capital gain over net short-term capital loss in any year. The Fund
will not in any event distribute net long-term capital gains realized in any
year to the extent that a capital loss is carried forward from prior years
against such gain. To the extent such excess was retained and not exhausted by
the carryforward of prior years' capital losses, it would be subject to Federal
income tax in the hands of the Fund. Upon proper designation of this amount by
the Fund, each shareholder would be treated for Federal income tax purposes as
if the Fund had distributed to him on the last day of its taxable year his pro
rata share of such excess, and he had paid his pro rata share of the taxes paid
by the Fund and reinvested the remainder in the Fund. Accordingly, each
shareholder would (a) include his pro rata share of such excess as long-term
capital gain income in his tax return for his taxable year in which the last day
of the Fund's taxable year falls, (b) be entitled either to a tax credit on his
return for, or to a refund of, his pro rata share of the taxes paid by the Fund,
and (c) be entitled to increase the adjusted tax basis for his shares in the
Fund by the difference between his pro rata share of such excess and his pro
rata share of such taxes.
For Federal income tax purposes, the Fund is permitted to carry forward a net
capital loss in any year to offset net capital gains, if any, during the eight
years following the year of the loss. To the extent subsequent net capital gains
are offset by such losses, they would not result in Federal income tax liability
to the Fund and, as noted above, would not be distributed as such to
shareholders. Presently, there are no realized capital loss carryforwards
available to offset future net realized capital gains.
Investment in debt obligations that are at risk of or in default presents
special tax issues for the Fund. Tax rules are not entirely clear about issues
such as when the Fund may cease to accrue interest, original issue discount, or
market discount, when and to what extent deductions may be taken for bad debts
or worthless securities, how payments received on obligations in default should
be allocated between principal and income, and whether exchanges of debt
obligations in a workout context are taxable. These and other issues will be
addressed by the Fund, in the event it acquires or holds any such obligations,
in order to reduce the risk of distributing insufficient income to preserve its
status as a regulated investment company and seek to avoid becoming subject to
Federal income or excise tax.
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For purposes of the dividends-received deduction available to corporations,
dividends received by the Fund, if any, from U.S. domestic corporations in
respect of the stock of such corporations held by the Fund, for U.S. Federal
income tax purposes, for at least 46 days (91 days in the case of certain
preferred stock) during a prescribed period extending before and after each
dividend and distributed and properly designated by the Fund may be treated as
qualifying dividends. Corporate shareholders must meet the holding period
requirements stated above with respect to their shares of the Fund for each
dividend in order to qualify for the deduction and, if they have any debt that
is deemed under the Code directly attributable to Fund shares, may be denied a
portion of the dividends received deduction. The entire qualifying dividend,
including the otherwise-deductible amount, will be included in determining the
excess (if any) of a corporate shareholder's adjusted current earnings over its
alternative minimum taxable income, which may increase its alternative minimum
tax liability. Additionally, any corporate shareholder should consult its tax
adviser regarding the possibility that its basis in its shares may be reduced,
for Federal income tax purposes, by reason of "extraordinary dividends" received
with respect to the shares and, to the extent such basis would be reduced below
zero, that current recognition of income would be required.
The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in certain 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"), paid by the Fund, subject to certain provisions and limitations
contained in the Code, if the Fund so elects. If more than 50% of the value of
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 shares 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 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
cannot or does not make this 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.
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The Fund is required to accrue income on any debt securities that have more than
a de minimis amount of original issue discount (or debt securities acquired at a
market discount, if the Fund elects to include market discount in income
currently) prior to the receipt of the corresponding cash payment. The mark to
market or constructive sale rules applicable to certain options, futures,
forwards, short sales or other transactions and forward contracts may also
require the Fund to recognize income or gain without a concurrent receipt of
cash. Additionally, some countries restrict repatriation which may make it
difficult or impossible for the Fund to obtain cash corresponding to its
earnings or assets in those countries. However, the Fund must distribute to
shareholders for each taxable year substantially all of its net income and net
capital gains, including such income or gain, to qualify as a regulated
investment company and avoid liability for any federal income or excise tax.
Therefore, the Fund may have to dispose of its portfolio securities under
disadvantageous circumstances to generate cash, or may have to leverage itself
by borrowing the cash, to satisfy these distribution requirements.
A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent (if any) the Fund's distributions
are derived from interest on (or, in the case of intangible property taxes, the
value of its assets is attributable to) certain U.S. Government obligations,
provided in some states that certain thresholds for holdings of such obligations
and/or reporting requirements are satisfied. The Fund will not seek to satisfy
any threshold or reporting requirements that may apply in particular taxing
jurisdictions, although the Fund may in its sole discretion provide relevant
information to shareholders.
The Fund will be required to report to the Internal Revenue Service (the "IRS")
all taxable distributions to shareholders, as well as gross proceeds from the
redemption or exchange of Fund shares, except in the case of certain exempt
recipients, i.e., corporations and certain other investors distributions to
which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions and proceeds may be subject to
backup withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the Fund with their correct taxpayer
identification number and certain certifications required by the IRS or if the
IRS or a broker notifies the Fund that the number furnished by the shareholder
is incorrect or that the shareholder is subject to backup withholding as a
result of failure to report interest or dividend income. A Fund may refuse to
accept an application that does not contain any required taxpayer identification
number or certification that the number provided is correct. If the backup
withholding provisions are applicable, any such distributions and proceeds,
whether taken in cash or reinvested in shares, will be reduced by the amounts
required to be withheld. Any amounts withheld may be credited against a
shareholder's U.S. federal income tax liability. Investors should consult their
tax advisers about the applicability of the backup withholding provisions.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions and certain
prohibited transactions, is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain types of
investors, such as tax-exempt entities, insurance companies and financial
institutions. Dividends, capital gain distributions and ownership of or gains
realized on the redemption (including an exchange) of shares of the Fund may
also be subject to state and local taxes. Shareholders should consult their own
tax advisers as to the Federal, state or local tax consequences of ownership of
shares of, and receipt of distributions from, the Fund in their particular
circumstances.
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Non-U.S. investors not engaged in a U.S. trade or business with which their Fund
investment is effectively connected will be subject to U.S. Federal income tax
treatment that is different from that described above. These investors may be
subject to non- resident alien withholding tax at the rate of 30% (or a lower
rate under an applicable tax treaty) on amounts treated as ordinary dividends
from the Fund and, unless an effective IRS Form W-8, Form W-8BEN or authorized
withholding certificate is on file, to 31% backup withholding on certain other
payments from the Fund. Non-U.S. investors should consult their tax advisers
regarding such treatment and the application of foreign taxes to an investment
in the Fund.
The Fund is not subject to Massachusetts corporate excise or franchise taxes.
The Fund anticipates that provided that the Fund qualifies as a regulated
investment company under the Code, it will also not be required to pay any
Massachusetts income tax.
CALCULATION OF PERFORMANCE
There is no average annual total return for Class A shares of the Fund for the 1
year and 5 year perios since the fund commneced operations on August 28, 2000.
There is no average annual total return for Class B shares of the Fund for the 1
year period since the fund commenced operations on August 28, 2000.
There is no average annual total return for Class C shares of the Fund for the 1
year period since the Fund commenced operations on August 28, 2000.
Total return is computed by finding the average annual compounded rate of return
over the one-year, five year and life-of-fund periods that would equate the
initial amount invested to the ending redeemable value according to the
following formula:
n ______
T = \ / ERV/P - 1
Where:
P= a hypothetical initial investment of $1,000.
T= average annual total return.
n= number of years.
ERV= ending redeemable value of a hypothetical $1,000 investment made at the
beginning of the 1 year, 5 year and life-of-fund periods.
Because each class has its own sales charge and fee structure, the classes have
different performance results. In the case of each class, this calculation
assumes the maximum sales charge is included in the initial investment or the
CDSC is applied at the end of the period, respectively. This calculation assumes
that all dividends and distributions are reinvested at net asset value on the
reinvestment dates during the period. The "distribution rate" is determined by
annualizing the result of dividing the declared dividends of the Fund during the
period stated by the maximum offering price or net asset value at the end of the
period. Excluding the Fund's sales charge from the distribution rate produces a
higher rate.
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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 or Class
C shares or the CDSC on Class B or Class C shares into account. Excluding the
Fund's sales charge on Class A shares and the CDSC on Class B or Class C shares
from a total return calculation produces a higher total return figure.
The Fund may advertise yield, where appropriate. The Fund's yield is computed by
dividing net investment income per share determined for a 30-day period by the
maximum offering price per share (which includes the full sales charge, if
applicable) on the last day of the period, according to the following standard
formula:
6
Yield = 2 ( [ ( a - b ) + 1 ] - 1 )
-------
cd
Where:
a = dividends and interest earned during the period.
b = net expenses accrued during the period.
c = the average daily number of fund shares outstanding during the period
that would be entitled to receive dividends.
d = the maximum offering price per share on the last day of the period
(NAV where applicable).
From time to time, in reports and promotional literature, the Fund's total
return and/or yield will be compared to indices of mutual funds such as Lipper
Analytical Services, Inc.'s "Lipper-Mutual Performance Analysis," a monthly
publication which tracks net assets, total return, and yield on mutual funds in
the United States. Ibottson and Associates, CDA Weisenberger and F.C. Towers are
also used for comparison purposes, as well as the Russell and Wilshire Indices.
Performance rankings and ratings reported periodically in, and excerpts from,
national financial publications such as MONEY MAGAZINE, FORBES, BUSINESS WEEK,
THE WALL STREET JOURNAL, MICROPAL, INC., MORNINGSTAR, STANGER'S and BARRON'S may
also be utilized. The Fund's promotional and sales literature may make reference
to the Fund's "beta". Beta is a reflection of the market related risk of the
Fund by showing how responsive the Fund is to the market.
The performance of the Fund is not fixed or guaranteed. Performance quotations
should not be considered to be representations of performance of the Fund for
any period in the future. The performance of the Fund is a function of many
factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest; and changes
in operating expenses are all examples of items that can increase or decrease
the Fund's performance.
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BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commissions are made by the Sub-Advisers, or the Adviser
pursuant to recommendations made by an investment committee, which consists of
officers and directors of the Adviser and officers and Trustees of the Trust who
are interested persons of the Fund. Orders for purchases and sales of securities
are placed in a manner, which, in the opinion of the officers of the Fund, will
offer the best price and market for the execution of each such transaction.
Purchases from underwriters of portfolio securities may include a commission or
commissions paid by the issuer and transactions with dealers serving as market
maker reflect a "spread." Debt securities are generally traded on a net basis
through dealers acting for their own account as principals and not as brokers;
no brokerage commissions are payable on such transactions.
In the U.S. Government securities market, securities are generally traded on a
"net" basis with dealers acting as principal for their own account without a
stated commission, although the price of the security usually includes a profit
to the dealer. On occasion, certain money market instruments and agency
securities may be purchased directly from the issuer, in which case no
commissions or premiums are paid. In other countries, both debt and equity
securities are traded on exchanges at fixed commission rates. Commissions on
foreign transactions are generally higher than the negotiated commission rates
available in the U.S. There is generally less government supervision and
regulation of foreign stock exchanges and broker-dealers than in the U.S.
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
The policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with the foregoing primary policy, the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
and such other policies as the Trustees may determine, the Adviser and
Sub-Adviser may consider sales of shares of the Fund as a factor in the
selection of broker-dealers to execute the Fund's portfolio transactions.
To the extent consistent with the foregoing, the Fund will be governed in the
selection of brokers and dealers, and the negotiation of brokerage commission
rates and dealer spreads, by the reliability and quality of the services,
including primarily the availability and value of research information and, to a
lesser extent, statistical assistance furnished to the Adviser and Sub-Advisers
of the Fund. It is not possible to place a dollar value on information and
services to be received from brokers and dealers, since it is only supplementary
to the research efforts of the Adviser and Sub-Advisers. The receipt of research
information is not expected to reduce significantly the expenses of the Adviser
and Sub-Advisers. 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
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advisory clients of the Adviser may result in research information and
statistical assistance beneficial to the Fund. Similarly, research information
and assistance provided to the Sub-Advisers by brokers and dealers may benefit
other advisory clients or affiliates of the Sub-Advisers, and, conversely,
brokerage commissions and spreads paid by other advisory clients of the
Sub-Advisers may result in research information and statistical assistance
beneficial to the Fund. The Fund will make no commitment to allocate portfolio
transactions upon any prescribed basis. While the Adviser, in conjunction with
the Sub-Advisers, 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.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the Fund
may pay to a broker which provides brokerage and research services to the Fund
an amount of disclosed commission in excess of the commission which another
broker would have charged for effecting that transaction. This practice is
subject to a good faith determination by the Trustees that such price is
reasonable in light of the services provided and to such policies as the
Trustees may adopt from time to time.
The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of Signator Investors, Inc., a broker-dealer (until January 1, 1999,
John Hancock Distributors, Inc.) ("Signator" or "Affiliated Broker").
Mercury and Merrill Lynch, Pierce, Fenner & Smith, Inc. are both wholly owned
subsidiaries of Merrill Lynch & Co., Inc. Merrill Lynch, Pierce, Fenner & Smith,
Inc. has several affiliates engaged in the brokerage business throughout the
United States and abroad (all "Affiliated Brokers"). Pursuant to procedures
determined 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.
Affiliated Brokers may act as broker for the Fund on exchange transactions,
subject, however, to the general policy of the Fund set forth above and the
procedures adopted by the Trustees pursuant to the Investment Company Act.
Commissions paid to an Affiliated Broker must be at least as favorable as those
which the Trustees believe to be contemporaneously charged by other brokers in
connection with comparable transactions involving similar securities being
purchased or sold. A transaction would not be placed with an Affiliated Broker
if the Fund would have to pay a commission rate less favorable than the
Affiliated Broker's contemporaneous charges for comparable transactions for its
other most favored, but unaffiliated, customers except for accounts for which
the Affiliated Broker acts as clearing broker for another brokerage firm, and
any customers of the Affiliated Broker not comparable to the Fund as determined
by a majority of the Trustees who are not interested persons (as defined in the
Investment Company Act) of the Fund, the Adviser or the Affiliated Broker.
Because the Adviser, which is affiliated with the Affiliated Broker, 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. Because of
this, client accounts in a particular style may sometimes not sell or acquire
securities as quickly or at the same prices as they might if each were managed
and traded individually.
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For purchases of equity securities, when a complete order is not filled, a
partial allocation will be made to each account pro rata based on the order
size. For high demand issues (for example, initial public offerings), shares
will be allocated pro rata by account size as well as on the basis of account
objective, account size ( a small account's allocation may be increased to
provide it with a meaningful position), and the account's other holdings. In
addition, an account's allocation may be increased if that account's portfolio
manager was responsible for generating the investment idea or the portfolio
manager intends to buy more shares in the secondary market. For fixed income
accounts, generally securities will be allocated when appropriate among accounts
based on account size, except if the accounts have different objectives or if an
account is too small to get a meaningful allocation. For new issues, when a
complete order is not filled, a partial allocation will be made to each account
pro rata based on the order size. However, if a partial allocation is too small
to be meaningful, it may be reallocated based on such factors as account
objectives, duration benchmarks and credit and sector exposure. In some
instances, this investment procedure may adversely affect the price paid or
received by the Fund or the size of the position obtainable for it. On the other
hand, to the extent permitted by law, the Adviser may aggregate securities to be
sold or purchased for the Fund with those to be sold or purchased for other
clients managed by it in order to obtain best execution.
TRANSFER AGENT SERVICES
John Hancock Signature Services, Inc., 1 John Hancock Way, Suite 1000, Boston,
Massachusetts 02217-1000, a wholly-owned indirect subsidiary of the Life
Company, is the transfer and dividend paying agent for the Fund. The Fund pays
Signature Services an annual fee of $19.00 for each Class A shareholder account
and $21.50 for each Class B shareholder account and $20.50 for each Class C
shareholder account. The Fund also pays certain out-of-pocket expenses. These
expenses are aggregated and charged to the Fund allocated to each class on the
basis of their relative net asset value.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Fund and Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts 02109. Under the custodian agreement, Brown Brothers Harriman &
Co., performs custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
The independent accountants of the Fund are . audits
and renders an opinion on the Fund's annual financial statements and reviews the
Fund's annual Federal income tax return.
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APPENDIX-A
MORE ABOUT RISK
A fund's risk profile is largely defined by the fund's principal securities and
investment practices. You may find the most concise description of the fund's
risk profile in the prospectus.
A fund is permitted to utilize -- within limits established by the trustees --
certain other securities and investment practices that have higher risks and
opportunities associated with them. To the extent that the fund utilizes these
securities or practices, its overall performance may be affected, either
positively or negatively. On the following pages are brief definitions of
certain associated risks with them, with examples of related securities and
investment practices included in brackets. See the "Investment Objectives and
Policies" and "Investment Restrictions" sections of this Statement of Additional
Information for a description of this Fund's investment policies. The fund
follows certain policies that may reduce these risks.
As with any mutual fund, there is no guarantee that the fund will earn income or
show a positive total return over any period of time -- days, months or years.
TYPES OF INVESTMENT RISK
Correlation risk The risk that changes in the value of a hedging instrument will
not match those of the asset being hedged (hedging is the use of one investment
to offset the effects of another investment). Incomplete correlation can result
in unanticipated risks. (e.g., short sales, financial futures and options;
securities and index options, currency contracts).
Credit risk The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. (e.g., borrowing; reverse repurchase agreements, repurchase
agreements, securities lending, non-investment-grade securities, financial
futures and options; securities and index options).
Currency risk The risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment. Adverse
changes in exchange rates may erode or reverse any gains produced by foreign
currency denominated investments and may widen any losses. (e.g., foreign
equities, financial futures and options; securities and index options, currency
contracts).
Information risk The risk that key information about a security or market is
inaccurate or unavailable. (e.g., non-investment-grade securities, foreign
equities).
Interest rate risk The risk of market losses attributable to changes in interest
rates. With fixed-rate securities, a rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in values. (e.g.,
non-investment-grade securities, financial futures and options; securities and
index options).
Leverage risk Associated with securities or practices (such as borrowing) that
multiply small index or market movements into large changes in value. (e.g.,
borrowing; reverse repurchase agreements, when-issued securities and forward
commitments).
o Hedged When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that the
fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. (e.g., short sales, financial futures and options
securities and index options; currency contracts).
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o Speculative To the extent that a derivative is not used as a hedge, the
fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater
than the derivative's original cost. (e.g., short sales, financial futures
and options securities and index options; currency contracts).
o 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. (e.g., non-investment-grade securities,
short sales, restricted and illiquid securities, financial futures and
options securities and index options; currency contracts).
Management risk The risk that a strategy used by a fund's management may fail to
produce the intended result. Common to all mutual funds.
Market risk The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. 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. (e.g., short sales, short-term trading,
when-issued securities and forward commitments, non-investment-grade securities,
foreign equities, financial futures and options; securities and index options
restricted and illiquid securities).
Natural event risk The risk of losses attributable to natural disasters, crop
failures and similar events. (e.g., foreign equities).
Opportunity risk The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments. (e.g., short sales, when-issued securities and forward commitments;
financial futures and options; securities and index options, currency
contracts).
Political risk The risk of losses attributable to government or political
actions, from changes in tax or trade statutes to governmental collapse and
war.(e.g., foreign equities).
Valuation risk The risk that a fund has valued certain of its securities at a
higher price than it can sell them for. (e.g., non-investment-grade securities,
restricted and illiquid securities).
A-2
<PAGE>
JOHN HANCOCK EQUITY TRUST
PART C.
OTHER INFORMATION
Item. 23. Exhibits:
The exhibits to this Registration Statement are listed in the Exhibit Index
hereto and are incorporated herein by reference.
Item 24. Persons Controlled by or under Common Control with Registrant.
No person is directly or indirectly controlled by or under common control with
Registrant.
Item. 25. Indemnification.
Indemnification provisions relating to the Registrant's Trustees, officers,
employees and agents is set forth in Article VII of the Registrant's By Laws
included as Exhibit 2 herein.
Under Section 12 of the Distribution Agreement, John Hancock Funds, Inc. ("John
Hancock Funds") has agreed to indemnify the Registrant and its Trustees,
officers and controlling persons against claims arising out of certain acts and
statements of John Hancock Funds.
Section 9(a) of the By-Laws of John Hancock Mutual Life Insurance Company ("the
Insurance Company") provides, in effect, that the Insurance Company will,
subject to limitations of law, indemnify each present and former director,
officer and employee of the Insurance Company who serves as a Trustee or officer
of the Registrant at the direction or request of the Insurance Company against
litigation expenses and liabilities incurred while acting as such, except that
such indemnification does not cover any expense or liability incurred or imposed
in connection with any matter as to which such person shall be finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Insurance Company. In addition, no such
person will be indemnified by the Insurance Company in respect of any final
adjudication unless such settlement shall have been approved as in the best
interests of the Insurance Company either by vote of the Board of Directors at a
meeting composed of directors who have no interest in the outcome of such vote,
or by vote of the policyholders. The Insurance Company may pay expenses incurred
in defending an action or claim in advance of its final disposition, but only
upon receipt of an undertaking by the person indemnified to repay such payment
if he should be determined not to be entitled to indemnification.
Article IX of the respective By-Laws of John Hancock Funds and John Hancock
Advisers, Inc. ("the Adviser") provide as follows:
"Section 9.01. Indemnity. Any person made or threatened to be made a party to
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was at any time since the
inception of the Corporation a director, officer, employee or agent of the
Corporation or is or was at any time since the inception of the Corporation
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall be indemnified by the Corporation against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and the liability was not incurred by reason of gross
negligence or reckless disregard of the duties involved in the conduct of his
office, and expenses in connection therewith may be advanced by the Corporation,
all to the full extent authorized by the law."
<PAGE>
"Section 9.02. Not Exclusive; Survival of Rights: The indemnification provided
by Section 9.01 shall not be deemed exclusive of any other right to which those
indemnified may be entitled, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person."
Insofar as indemnification for liabilities under the Securities Act of 1933 (the
"Act") may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the Registrant's Declaration of Trust and By-Laws of John
Hancock Funds, the Adviser, or the Insurance Company or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
Item 26. Business and Other Connections of Investment Advisers.
For information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and Directors of the Adviser,
reference is made to Form ADV (801-8124) filed under the Investment Advisers Act
of 1940, which is incorporated herein by reference.
Item 27. Principal Underwriters.
(a) John Hancock Funds acts as principal underwriter for the Registrant and also
serves as principal underwriter or distributor of shares for John Hancock Cash
Reserve, Inc., John Hancock Bond Trust, John Hancock Current Interest, John
Hancock Series Trust, John Hancock Tax-Free Bond Trust, John Hancock California
Tax-Free Income Fund, John Hancock Capital Series, John Hancock Bond Fund, John
Hancock Tax-Exempt Series, John Hancock Strategic Series, John Hancock World
Fund, John Hancock Equity Trust, John Hancock Investment Trust, John Hancock
Institutional Series Trust, John Hancock Investment Trust II and John Hancock
Investment Trust III.
(b) The following table lists, for each director and officer of John Hancock
Funds, the information indicated.
C-2
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
------------------ --------------------- ---------------------
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Stephen L. Brown Director and Chairman Trustee and Chairman
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Maureen R. Ford Director, Vice Chairman, President Trustee, Vice Chairman, President
101 Huntington Avenue and Chief Executive Officer and Chief Executive Officer
Boston, Massachusetts
Robert H. Watts Director, Executive Vice None
John Hancock Place President and Chief Compliance
P.O. Box 111 Officer
Boston, Massachusetts
Osbert M. Hood Executive Vice President, Chief Executive Vice President
101 Huntington Avenue Financial Officer and Treasurer and Chief Financial Officer
Boston, Massachusetts
David A. King Director None
380 Stuart Street
Boston, Massachusetts
Richard O. Hansen Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
C-3
<PAGE>
Name and Principal Positions and Offices Positions and Offices
------------------ --------------------- ---------------------
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Susan S. Newton Vice President Vice President and Secretary
101 Huntington Avenue
Boston, Massachusetts
Thomas E. Moloney Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Jeanne M. Livermore Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard S. Scipione Director Trustee
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John M. DeCiccio Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
C-4
<PAGE>
Name and Principal Positions and Offices Positions and Offices
------------------ --------------------- ---------------------
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Foster L. Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
David D'Alessandro Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
William C. Fletcher Director None
53 State Street
Boston, Massachusetts
James V. Bowhers President None
101 Huntington Avenue
Boston, Massachusetts
Kathleen M. Graveline Senior Vice President None
P.O. Box 111
Boston, Massachusetts
Keith F. Hartstein Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
Peter Mawn Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
J. William Bennintende Vice President None
101 Huntington Avenue
Boston, Massachusetts
C-5
<PAGE>
Name and Principal Positions and Offices Positions and Offices
------------------ --------------------- ---------------------
Business Address With Underwriter with Registrant
---------------- ---------------- ---------------
Karen F. Walsh Vice President None
101 Huntington Avenue
Boston, Massachusetts
Gary Cronin Vice President None
101 Huntington Avenue
Boston, Massachusetts
Kristine Pancare Vice President None
101 Huntington Avenue
Boston, Massachusetts
(c) None.
Item 28. Location of Accounts and Records.
The Registrant maintains the records required to be maintained by it
under Rules 31a-1 (a), 31a-a(b), and 31a-2(a) under the Investment
Company Act of 1940 at its principal executive offices at 101
Huntington Avenue, Boston Massachusetts 02199-7603. Certain records,
including records relating to Registrant's shareholders and the
physical possession of its securities, may be maintained pursuant to
Rule 31a-3 at the main office of Registrant's Transfer Agent and
Custodian.
Item 29. Management Services.
Not applicable.
Item 30. Undertakings.
Not applicable
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant 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 7th day of
June, 2000.
JOHN HANCOCK CAPITAL SERIES
By: * /s/Stephen L. Brown
--------------------------
Stephen L. Brown
Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman and Chief Executive June 7, 2000
------------------------- Officer (Principal Executive
Stephen L. Brown Officer)
*
------------------------- Trustee, Vice Chairman, President
Maureen R. Ford and Chief Executive Officer
*
------------------------- Executive Vice President and
Osbert M. Hood Chief Financial Officer
/s/James J. Stokowski Vice President, Treasurer
--------------------- (Principal Accounting Officer)
James J. Stokowski
_________*_________ Trustee
Dennis S. Aronowitz
_________*_____________ Trustee
Richard P. Chapman, Jr.
_________*_________ Trustee
William J. Cosgrove
_________*______ Trustee
Leland O. Erdahl
C-7
<PAGE>
_______*_________ Trustee
Richard A. Farrell
_______*______ Trustee
Gail D. Fosler
________*_______________ Trustee
William F. Glavin
________*________________ Trustee
John A. Moore
________*________________ Trustee
Patti McGill Peterson
_________*_______________ Trustee
Richard S. Scipione
By: /s/Susan S. Newton June 7, 2000
------------------
Susan S. Newton,
Attorney-in-Fact, under
Powers of Attorney
January 1, 1999 and
March 17, 1999 and December 7, 1999
filed herewith.
<PAGE>
John Hancock Capital Series John Hancock Sovereign Bond Fund
John Hancock Declaration Trust John Hancock Special Equities Fund
John Hancock Income Securities Trust John Hancock Strategic Series
John Hancock Investment Trust II John Hancock Tax-Exempt Series Fund
John Hancock Investment Trust III John Hancock World Fund
John Hancock Investors Trust
POWER OF ATTORNEY
-----------------
The undersigned Trustee/Officer of each of the above listed Trusts,
each a Massachusetts business trust, does hereby severally constitute and
appoint Susan S. Newton and James J. STOKOWSKI, and each acting singly, to be my
true, sufficient and lawful attorneys, with full power to each of them, and each
acting singly, to sign for me, in my name and in the capacity indicated below,
any Registration Statement on Form N-1A and any Registration Statement on Form
N-14 to be filed by the Trust under the Investment Company Act of 1940, as
amended (the "1940 Act"), and under the Securities Act of 1933, as amended (the
"1933 Act"), and any and all amendments to said Registration Statements, with
respect to the offering of shares and any and all other documents and papers
relating thereto, and generally to do all such things in my name and on my
behalf in the capacity indicated to enable the Trust to comply with the 1940 Act
and the 1933 Act, and all requirements of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
said attorneys or each of them to any such Registration Statements and any and
all amendments thereto.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument as
of the 7th day of December, 1999.
/s/Stephen L. Brown /s/William F. Glavin
------------------- --------------------
Stephen L. Brown, as Trustee and Chairman William F. Glavin
/s/Maureen R. Ford /s/Anne C. Hodsdon
------------------ ------------------
Maureen R. Ford, as Trustee, Anne C. Hodsdon, as Trustee and President
Vice Chairman, Chief Executive Officer
/s/Dennis S. Aronowitz /s/Osbert M. Hood
---------------------- -----------------
Dennis S. Aronowitz Osbert M. Hood, as Chief Financial Officer
/s/Richrd P. Chapman /s/John A. Moore
-------------------- ----------------
Richard P. Chapman, Jr. John A. Moore
/s/William J. Cosgrove /s/Patti McGill Peterson
---------------------- ------------------------
William J. Cosgrove Patti McGill Peterson
/s/Leland O. Erdahl /s/John W. Pratt
------------------- ----------------
Leland O. Erdahl John W. Pratt
/s/Richard A. Farrell /s/Richard S. Scipione
--------------------- ----------------------
Richard A. Farrell Richard S. Scipione
/s/Gail D. Fosler
-----------------
Gail D. Fosler
<PAGE>
The Declaration of Trust, a copy of which, together with all amendments
thereto, is on file in the office of the Secretary of State of The Commonwealth
of Massachusetts, provides that no Trustee, officer, employee or agent of the
Trust or any Series thereof shall be subject to any personal liability
whatsoever to any Person, other than to the Trust or its shareholders, in
connection with Trust Property or the affairs of the Trust, save only that
arising from bad faith, willful misfeasance, gross negligence or reckless
disregard of his/her duties with respect to such Person; and all such Persons
shall look solely to the Trust Property, or to the Trust Property of one or more
specific Series of the Trust if the claim arises from the conduct of such
Trustee, officer, employee or agent with respect to only such Series, for
satisfaction of claims of any nature arising in connection with the affairs of
the Trust.
COMMONWEALTH OF MASSACHUSETTS )
)ss
COUNTY OF SUFFOLK )
Then personally appeared the above-named Dennis S. Aronowitz, Stephen
L. Brown, Richard P. Chapman, Jr., William J. Cosgrove, Leland O. Erdahl,
Richard A. Farrell, Maureen L. Ford, Gail D. Fosler, William F. Glavin, Anne C.
Hodsdon, Osbert M. Hood, John A. Moore, Patti McGill Peterson, John W. Pratt,
and Richard S. Scipione, who acknowledged the foregoing instrument to be his or
her free act and deed, before me, this 7th day of December, 1999.
/s/Ann Marie White
------------------
Notary Public
My Commission Expires: 10/20/00
</TABLE>
<PAGE>
John Hancock Equity Trust
(File No. 2-92548)
INDEX TO EXHIBITS
99.(a) Articles to Incorporation. Amended and Restated Declaration of Trust
dated June 8, 1999.+
99.(a).1 Form of Change of Name of Trust, Amendment of Section 5.11 and
Establishment and Designation of Class A, Class B and Class C
Shares of Beneficial Interest of John Hancock Growth Trends
Fund, a Series of John Hancock Special Equities Fund effective
June 6, 2000.+
99.(b) By-Laws. Amended and Restated By-Laws dated December 3, 1996.***
99.(c) Instruments Defining Rights of Securities Holders. See exhibits
99.(a) and 99.(b).
99.(d) Investment Advisory Contracts. Form of Investment Management
Contract between the Registrant and John Hancock Advisers, Inc. dated
August 28, 2000.+
99.(d).1 Form of Sub-Investment Management Contracts among Registrant, John
Hancock Advisers, Inc. and American Fund Advisors, Inc. dated
August 28, 2000.+
99.(d).2 Form of Sub-Investment Management Contracts among Registrant, John
Hancock Advisers, Inc. and Mercury Asset Management US dated
August 28, 2000.+
99.(e) Underwriting Contracts. Distribution Agreement between John Hancock
Funds, Inc. (formerly named John Hancock Broker Distribution
Services, Inc. and the Registrant dated August 1, 1991.*
99.(e).1 Form of Amendment to Distribution Agreement between Registrant and
John Hancock Funds, Inc. dated August 28, 2000.+
99.(e).2 Form of Soliciting Dealer Agreement between John Hancock Funds, Inc.
and Selected Dealers.+
99.(e).3 Form of Financial Institution Sales and Service Agreement between
John Hancock Funds, Inc. and the John Hancock funds.*
99.(f) Bonus or Profit Sharing Contracts. Not Applicable.
99.(g) Custodian Agreements. Amended and Restated Master Custodian
Agreement between John Hancock Mutual Funds and Brown Brothers
Harriman & Company dated March 9, 1999.+
99.(g).1 Form of Master Custodian Agreement between John Hancock Funds and
Brown Brothers Harriman & Company effective August 28, 2000.+
99.(h) Other Material Contracts. Amended and Restated Master Transfer
Agency and Service Agreement between John Hancock funds and John
Hancock Signature Services, Inc. dated June 1, 1998.****
99.(h).1 Accounting and Legal Services Agreement between John Hancock
Advisers, Inc. and Registrant as of January 1, 1996.**
<PAGE>
99.(h).2 Form of Amendment to Restated Master Transfer Agency and Service
Agreement dated June 1, 1998 between the Registrant and John Hancock
Signature Services, Inc. establishing a new series, John Hancock
Growth Trends Fund and retaining the Transfer Agent dated
August 28, 2000.+
99.(i) Legal Opinion.+
99.(j) Other Opinion. Auditor's Consent. Not Applicable.
99.(k) Omitted Financial Statements. Not Applicable.
99.(l) Initial Capital Agreements. Form of Letter of Investment Intent
between John Hancock Advisers, Inc. and the Registrant on behalf of
John Hancock Growth Trends Fund dated July 31, 2000.+
99.(m) Rule 12b-1 Plans. Form of Distribution Plan for Class A Shares
between the Registrant and John Hancock Funds dated August 28, 2000.+
99.(m).1 Form of Distribution Plan for Class B Shares between the Registrant
and John Hancock Funds dated August 28, 2000.+
99.(m).2 Form of Distribution Plan for Class C Shares between the Registrant
and John Hancock Funds dated August 28, 2000.+
99.(n) Financial Data Schedule. Not Applicable.
99.(o) Rule 18f-3 Plan. John Hancock Funds Class A, Class B and Class
C Amended and Restated Multiple Class Plan pursuant to Rule
18f-3 for Registrant dated August 28, 2000.+
99.(p) Code of Ethics. John Hancock Advisers, Inc. and each of the John
Hancock Funds.+
99.(p).1 American Fund Advisors, Inc.+
99.(p).2 Merrill Lynch Asset Management Group (MLAMG) Registered Investment
Companies and their Investment Advisers and Principal Underwriter.+
* Previously filed electronically with Registration Statement and/or
post-effective amendment no. 11 file nos. 811-4079 and 2-92548 on
February 23, 1995, accession number 0000950156-95-000048.
** Previously filed electronically with Registration Statement and/or
post-effective amendment no. 13 file nos. 811-4079 and 2-92548 on
April 23, 1996, accession number 0001052156-96-000041.
*** Previously filed electronically with Registration Statement and/or
post-effective amendment no. 14 file nos. 811-4079 and 2-92548 on
February 25, 1997, accession number 000101521-97-000214.
**** Previously filed electronically with Registration Statement and/or
post-effective amendment no. 16 file nos. 811-4079 and 2-92548 on
December 21, 1998, accession number 000101521-98-000400.
***** Previously filed electronically with Registration Statement and/or
post-effective amendment no. 17 file nos. 811-4079 and 2-92548 on
February 24, 1999, accession number 000101521-99-000139.
+ Filed herewith
